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OUR DEBT AND DUTY 
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THE CENTURY CO. 
New York & London 


Copyright, 1925, by 


THe CENTURY Co, 


PRINTED IN U. 8. A. 


AN APPRECIATION 


My early friendship for Harry Wallace was 
rooted in my deep affection and respect for his 
father. Uncle Henry Wallace was one of the 
most admirable characters I have ever known. 
His life was a model of kindly and intelligent 
usefulness; his old age was the perfect pattern 
of how man may decline in years without de- 
cline in happiness or service to his fellow-men. 
To me Uncle Henry Wallace was almost like 
a father, and I hope it is not beyond the truth 
to say that he thought of me almost as a son. 

From such an association as this sprang 
easily and naturally what in due time ripened 
into my strong affection, high admiration, and 
deep respect for Uncle Henry Wallace’s oldest 
son. I had known him more or less casually 
for years by occasional contact in the work he 
was doing most efficiently, and I was trying to 
do, for the farmers of the West and indeed of 
the whole United States. 


Vv 


APPRECIATION 


It was work for the farmers that first brought 
us Closely together. Moreover, Harry Wallace 
was a devoted admirer of President Roosevelt, 
and that bound us in an intimate bond. It was 
not, however, until the Great War and the work 
of the Food Administration that I got my first 
taste of his real quality. 

Both as an Iowa farmer and an agricultural 
economist, Harry Wallace knew the subject 
with which he dealt down to the ground and 
into the ground. It was his sound knowledge, 
his steadiness, his refusal to be stampeded that 
made him so conspicuously valuable as the edi- 
tor of ‘‘Wallaces’ Farmer,’’ and enabled him 
to render the great service he did as a member 
of the Food Administration. It was these 
same qualities that gave him the power to head 
off repeated false moves undertaken by high 
officials of the Food Administration, whose 
knowledge of agricultural economics and of the 
farmer’s mind were rudimentary where they 
were not wholly mistaken. 

It happened that I was at his home while the 
future Secretary of Agriculture was consider- 
ing the offer of the Secretaryship made to him 


Vi 


APPRECIATION 


by President Harding. He was extremely re- 
luctant to accept it, not because of any failure 
to see its possibilities of service, but because 
the lines of his life had been otherwise planned, 
and because he, like his father, had steadily re- 
fused numerous offers of political preferment. 
I urged him as strongly as I could to take the 
place, believing that in so doing lay the line of 
greatest usefulness. 

Few cabinet officers have ever taken up their 
duties in the face of difficulties as serious and 
perplexing as those which faced Secretary 
Wallace. At the moment when his work began, 
the disparity between the agricultural price 
level and the industrial price level was the 
greatest that had ever existed in the United 
States. So rapidly had the price of farm prod- 
ucts fallen that it was impossible for many 
farmers to buy even the necessities of ordinary 
life. While the new Secretary was a highly 
trained economist, his continual tendency was 
to think of the agricultural depression in terms 
of the sufferings of individuals, and he knew 
that he would be held responsible by the indi- 
vidual farmers of the nation for suggesting, 


Vil 


APPRECIATION: 


and if possible for securing, a remedy. This 
book of his is the direct outcome of that 
situation. 

As Secretary of Agriculture, Harry Wallace 
understood that it is not the sole function of 
the Department to increase production, and 
he acted upon that understanding. What the 
farmer gets for what he raises is far more im- 
portant to him than the mere quantity of his 
production. His problems are economic prob- 
lems; that is why there is for them no easy 
cure-all, and that is also why they must be 
solved on sound economic lines. Secretary 
Wallace impressed this view strongly upon the 
Department, and in important respects remade 
its organization in accordance with it. 

When the new Secretary first went to Wash- 
ington, I am happy to believe that I was able to 
be of some small service to him, because of my 
knowledge of Washington affairs, in the tedi- 
ous and uncomfortable process of settling down 
into his new work. After he was warm in his 
seat, he was wholly master of his work, and 
needed to call on no man for assistance. 

How much Secretary Wallace did to prevent 


viii 


APPRECIATION 


the attempted capture of the Federal Power 
Commission by the enemies of conservation; 
how large a part he took in defeating efforts to 
take possession of and destroy first the natural 
resources of Alaska and then the National For- 
ests of the United States is still unwritten his- 
tory. But I, as one to whom the inside story 
was known, desire to pay my earnest tribute 
to him for the brave and efficient performance 
of a duty that was anything but easy, and the 
achievement of results so large that the United 
States will forever be his debtor. 

Harry Wallace was so firmly rooted in quiet 
self-possession and, although humble of mind 
in the truest sense, so conscious of his own 
latent strength, that he could afford to be and 
was always slow to take offense. Those who 
knew him but superficially sometimes failed to 
understand the fineness of his quality in this 
respect, did not recognize in him the fighter to 
the last ditch that he really was, and venturing 
too far not seldom proved it to their own cost. 

To say that Harry Wallace was upright is 
merely to confirm the instant impression he 
made on every one who came in contact with 

1x 


APPRECIATION 


him. He was an earnest Christian and a model 
husband and father, with a keen sense of 
humor and a deep and quiet relish for the joy 
of life. Completely fearless under any and all 
circumstances, he utterly despised the corrup- 
tion that sprang up in Washington during his 
service there, and had the courage to let his 
contempt for it be known. 

I venture to believe that no man has ever 
held the post of Secretary of Agriculture whose 
knowledge of the farmer and of farm problems 
was as thoroughgoing and as wide as that of 
Harry Wallace. The work he began will not 
end with him. To quote from an editorial 
in ‘‘Wallaces’ Farmer’’ following his death: 
“The fight for agricultural equality will go 
on; so will the battle for a stable price 
level, for controlled production, for better rural 
schools and churches, for larger income and 
higher standards of living for the working 
farmer, for the checking of speculation in farm 
lands, and for the thousand and one things that 
are needed to make the sort of rural civiliza- 
tion’’ he labored for and hoped to see. 

Both before and since his appointment as 

x 


APPRECIATION 


Secretary of Agriculture, Henry C. Wallace 
was a great servant of the people. In him 
every farmer has lost a true and powerful 
friend, and the people of America a man who 
would gladly have given the last drop of his 
blood and the last ounce of his strength in the 
service of his fellow-men. 
GirrorD PrincHorT. 
Harrisburg, Pennsylvania, 
January 9, 1925. 


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FOREWORD 


When my father became Secretary of Agri- 
culture on March 4, 1921, the agriculture of the 
Nation had recently entered an extraordinary 
period of depression. Thousands of farmers 
either spoke or wrote to him concerning their 
griefs. He knew what they were going through 
because he himself had been a farmer during 
the depression in the early nineties. He knew 
that eventually the slow grinding of the eco- 
nomic mill would result in restoring agricul- 
tural prosperity. Nevertheless he felt that it 
was not only possible but a positive duty for the 
Government to take action with respect to cer- 
tain phases of the depression. In his contact 
with the larger business men in the Hast he 
came to feel that they misunderstood the condi- 
tion of agriculture and that he could do them 
and the farmers a real service in setting forth 
his analysis of the situation. 

He began work on the manuscript of this book 
in the early summer of 1924 and spent what leis- 
ure time he had on it from then until his death. 


Xili 


FOREWORD 


During the summer he had the active codpera- 
tion of Nils A. Olsen of the Bureau of Agricul- 
tural Economics in preparing a survey of 
the agricultural depression and its remedies. 
They drove the work ahead with great vigor, 
_ hoping to have the manuscript completed by the 

first of October. Just before my father went 
to the hospital on October 15, 1924, he approved 
nine of the eleven chapters. The other two had 
been written but were not altogether satisfac- 
tory. He had indicated the solution of certain 
difficulties to Mr. Olsen, and so, when his death 
took place, both Mr. Olsen and I felt that the 
manuscript should be completed. The changes 
desired by my father in Chapter III have been 
made by Mr. Olsen. The last chapter was 
written jointly by Mr. Olsen and myself, al- 
though it follows the thought as outlined by my 
father. By close association we were both 
familiar with his views, and we trust that we 
have been successful in clothing his ideas as he 
would have done. ‘T'he ideas throughout are 
those of Henry C. Wallace. 

Henry A. WALLACE, 

December 1, 1924. 


Xiv 


I warn my countrymen that the great recent progress 
made in city life is not a full measure of our civilization; 
for-our civilization rests at bottom on the wholesomeness, 
the attractiveness, and the completeness, as well as the pros- 
perity, of life in the country. The men and women on the 
farm stand for what is fundamentally best and most needed 
in our American life. Upon the development of country 
life rests ultimately our ability by methods of farming 
requiring the highest intelligence to continue to feed and 
clothe the hungry nations; to supply the city with fresh 
blood, clean bodies, and clear brains that can endure the 
terrific strain of modern life; we need the development of 
men in the open country who will be in the future, as in 
the past, the stay and strength of the nation in time of 
war and its guiding and controlling spirit in time of peace. 

If there is one lesson taught by history it is that the 
permanent greatness of any state must ultimately depend 
more upon the character of its country population than 
upon anything else. No growth of cities, no growth of 
wealth can make up for a loss in either the number or 
the character of the farming population. 

—THHODORE ROOSEVELT. 


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CHAPTER 


CONTENTS 


PAGE 


I INTRODUCTION Dawe PA AL COED BALL 1 3 
Il THe FarMer’s CONTRIBUTION TO THE 

NATION POLO SANs Peon Ree Harrie Ao 2 OY rane LE 

III Tue DEPRESSION .. . PLAS DA lea hab st 4° 

IV CAUSES OF THE DEPRESSION. . . . . 45 
V Tue FarmMer’s SHARE IN THE NATIONAL 

LR ORT el tee Re LOE SL Oe AR) MADR OE) 

VI Nationat Arp DuRING THE DEPRESSION . 97 
VII Foreign Markets ror Our FAarM Prop- 

| UCTS e e ° ° ° ° e ° ° ° 134 
VIII Crop ApbjJustMENTS AND ECONOMY IN 

WARM LOXPENDITURES (30) [20 RO La i 9188 

IX COOPERATION NEES Ta RCE Poy Ree Ree aed 2 0 
X <Apsustments In Farm INDEBTEDNESS, 
Taxres, FREIGHT RATES, AND OTHER 

EPEAT Uren et) SP) COUN UN eg Po Uh Ma Oe 
XI Restoration oF Farr Prick RELATION- 

SEPP Mein ak Whe time oh AS Oke Dal ht Na aam a 

XII Tue Future oF THE AMERICAN FARMER. 214 


XVI 


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ILLUSTRATIONS 


FIGURE PAGH 

1 The agricultural situation reflected in the 
trend of prices : A ANRC et: 

2 Bankruptcies among the farmers before and 
during the agricultural depression . 30 

3 Bankruptcies among the farmers, United 
States and geographic regions, 1915-1924 . 37 

4 Bank failures before and during the agricul- 
tural depression 42 

5 Bank failures, United States oy beet 
regions, 1915-1924. ; LP 43 

6 Farm prices and important farm costs, 
United States 1913-1924 . Se ete OO) 

7 Property taxes and gross value of farm prod- 
ucts, United States 1914-1923 . 75 

8 Distribution of the retail price of a one pound 
loaf of bread in Washington, D.C. . 81 

9 Farm products. Farm price and purchasing 
power 1913-1924 . : 85 

10 Vote in House of Representatives on the 
McNary-Haugen (export) Bill . . 204 

11 Vote in House of Representatives on the 
tariff bill of 1922 . . 205 


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OUR DEBT AND DUTY TO 
| THE FARMER 


CHAPTER I 
INTRODUCTION | 


N the spring of 1924 I was talking with a 
I friend, a very well-known public man, and 
the conversation drifted into a discussion of the 
state of agriculture, a subject which has be- 
come almost as common as the weather. I ex- 
pressed considerable concern over what has 
been happening to the farmers in recent years, 
and especially to those in the great surplus 
food-producing areas of the western two thirds 
of the country, and remarked that I did not 
think the people of the cities and of the indus- 
trial regions understood the serious condition 
of agriculture and the probable effect on our na- 
tional life of these conditions unless soon im- 

3 


OUR DEBT AND DUTY TO THE FARMER 


proved, and that I wished some way could be 
found to make the matter clear to them. 
Something I said caused my friend to look at 
me in some surprise and say: ‘‘Surely you do 
not mean to suggest that our agriculture is 
breaking down. Of course, we all know that 
the farmer has been having a hard time of it. 
We know that his prices are out of line with 
those of other goods, that it costs him more to 
produce than formerly, that many are heavily 
in debt, that taxes and railroad-rates have in- 
creased, and that, in general, the things he must 
buy are too high in proportion to the prices for 
what he has to sell. I know that a great many 
farmers have lost their farms, and a great many 
renters have gone broke. So far as I am con- 
cerned, my sympathies are with the farmer. 
He has been getting an unfair deal, and I am 
willing to do anything practicable to help him, 
but I do not think the situation is as serious as 
you seem to regard it. Our agriculture is not . 
breaking down. Our people will not go hungry. 
Some farmers are being driven off the land, but 
other farmers will take their places. Food will 
4 


INTRODUCTION 


be produced in abundance. It must be to sup- 
port our growing industries. With our wealth 
of fertile land and our vastly improved methods 
of farming we are not going to import our food 
from other countries. Already prices of farm 
products are improving, and it looks as if they 
will continue to improve.’’ And more to the 
same effect. 

The foregoing expresses in a general way the 
views of a large group, the members of which 
know agricultural conditions fairly well, and 
appreciate the need of improvement as quickly 
as possible. This group, however, seems to 
think that the trouble with agriculture concerns 
mainly the farmers who are now and have been 
on the land, and that whatever may happen to 
them or to some of them, others will come along 
and occupy the farms and continue production. 
This group recognizes the fact that farmers as 
a class are suffering economic hardship and in- 
justice, and they are willing to adopt what some 
others might regard as extreme measures to 
help farmers of the present time weather this 
economic storm. Their main thought, however, 

5 


OUR DEBT AND DUTY TO THE FARMER 


is of the present rather than of possible future 
dangers either to agriculture or industry, and 
their desire is to see that economic justice is 
done the farmers of the present time. 

This group, of which I have just been speak- 
“ing, occupies what might be called middle 
ground in the consideration of agricultural mat- 
ters. Another large group whose experiences 
have been confined to city and industrial life, 
and who for this reason find it difficult to under- 
stand why there has been so much talk about the 
farmer and his troubles, looks at the matter dif- 
ferently. They cannot see that the farmer has 
any more reason to complain than the manufac- 
turer or storekeeper, or any other business man 
who is having a hard time financially. They 
regard the difficulties of the farmers as tem- 
porary, as the natural outgrowth of war condi- 
tions at home and abroad, or as due to the lack 
of business judgment of the farmer himself. 
They say: ‘‘These difficulties must be over- 
come by the free operation of that good old law 
of supply and demand. [If prices are too low 
because farmers are producing too much, cut 

6 


INTRODUCTION 


down production or produce something else. 
Kconomize. Apply business methods to farm- 
ing. Watch us and do as we do. If you need 
more money for a time, we will lend it to you, 
provided you can give us strictly first-class 
security. Sell your automobile and stay at 
home and work harder. Hang on. You will 
come out all right.’’ 

These good people give an intellectual assent 
when some one says that the farmer is the back- 
bone of the Nation, or that we cannot have gen- 
eral prosperity very long unless we have a pros- 
perous agriculture. But such expressions have 
- no more real meaning to them than has the dox- 
ology to some other equally good people when 
they sing it in church. They lack a working 
knowledge of farming and farm conditions, and, 
therefore, have no conception of what has hap- 
pened to the farmer, and cannot appraise either 
the immediate or future effect on agriculture of 
the events of the last four years. They look 
upon the present depression as similar to pre- 
vious depressions. To suggest that anything 
unusual be done about it provokes from them a 

vi 


OUR DEBT AND DUTY TO THE FARMER 


smile of good-natured skepticism, which may 
turn into a cold glassy stare and possibly the 
hint of a suspicion that it might be well to in- 
quire into one’s close associates to make sure 
that they are not tinged with red. They are 
willing to entertain a feeling of sympathy for 
farmers who are having a hard time, provided 
that sympathy costs them nothing and further 
provided that they are not asked to cease wor- 
shiping at the shrine of laissez-faire. It does 
not occur to members of this group that the 
troubles of the farmer are the fault of any one 
but the farmer himself or that they are of such 
a nature as may affect them in their business, 
political, and social relations, although those 
men who are in public life find themselves in- 
creasingly annoyed by having to listen to dis- 
cussions on the agricultural depression. A 
fringe of this group does not hesitate to de- 
nounce the farmer and his family as ignorant, 
selfish, complaining folk, who are entitled to 
neither sympathy nor consideration. 

On the other side of the group which occupies 
the middle ground is a very large element com- 

8 


INTRODUCTION 


posed of farmers, of men who have close busi- 
ness dealings with farmers and can therefore 
understand farmers’ problems, of students 
of agriculture and of the history of nations, and 
many others. This group sees in conditions 
which have obtained during the past three years 
not only gross economic hardship to the farm- 
ers of the present day but probable results 
growing out of these conditions which may have 
a profound influence not alone upon agriculture 
and upon those industries which more or less 
directly depend upon agriculture, but upon our 
entire industrial, business, and social life. 
They regard this agricultural depression as 
quite different from those which have gone be- 
fore. They think that in considerable part at 
least the farmer is an innocent victim. They 
believe that unless farm conditions are im- 
proved very much and very soon, changes, eco- 
| nomic, political, and social, will be brought 
about which will not be for the good of the Na- 
tion. This group also has its fringe of extrem- 
ists who denounce what they are pleased to term 
the capitalistic class with the same fervor, 
9 


OUR DEBT AND DUTY TO THE FARMER 


though with shorter and uglier words and more 
picturesque diction, as the extremists at the 
other end denounce the farmer. 

All of these groups concede that since the 
summer of 1920 we have experienced a very 
severe agricultural depression from which we 
have not entirely emerged. Into this depres- 
sion have been drawn certain kinds of business, 
wholly or to a considerable extent dependent 
upon agriculture. It seems worth while, there- 
fore, to consider the nature of the depression, 
its primary causes, and its effect upon those 
who have suffered from it, not only the material 
effect in dollars and cents, but the possible so- 
cial and moral effect upon the farmers and the 
country at large. 


10 


CHAPTER II 


THE FARMERS’ CONTRIBUTION TO THE NATION 


culture and the effect of that condition 
on other industries, let us refresh our minds as 
to the important part the farmer plays in our 
national life. 

Farmers and their families make up about 
30 per cent. of our population. They exceed in 
number any other group engaged in one gen- 
eral industry. If for no other reason, there- 
fore, than because of its size and latent power, 
the manner in which the interest and welfare 
of this group may be affected by national 
policies, legislative or administrative, always 
should be considered. It is not in the national 
interest to disregard so important a group or 
to give it merely such attention as will keep it 
at work. Such an attitude is insufferable and 

11 


|B dtr discussing the condition of agri- 


OUR DEBT AND DUTY TO THE FARMER 


is certain to stimulate a group consciousness 
which soon develops into group prejudice. As 
this feeling gathers power, the group attracts 
smaller discontented elements, and finally com- 
pels action much more extreme than would 
have satisfied it a short time before. Failure 
to give needed assistance to such a group, 
whether engaged in farming or any other in- 
dustry, when it is struggling under economic . 
difficulties, especially when such difficulties are 
due in part to national policies, is a sure way to 
breed discontent and resentment not conducive 
to the national good. 

It is not necessary to speak of the indispen- 
sable character of the things produced on the 
farm, the food-stuffs and the raw materials for 
industry. Obviously but for agriculture there 
can be no industrial development. Man can 
live happily and with reasonable comfort with- 
out the products of organized industry, but in- 
dustry, transportation, commerce, and business 
in general cannot exist without agriculture. 
When agriculture, industry, and commerce 
work together, rapid growth and development 

12 


FARMERS’ CONTRIBUTION TO NATION 


result. At the beginning this country was 
mainly agricultural. As late as 1880 only 28 
per cent. of our people lived in the cities. 
During the latter half of the last century the 
development of transportation and markets and 
the invention and use of labor-saving machin- 
ery made possible the rapid opening up of vast 
areas of fertile land. 

This resulted in the most remarkable na- 
tional development the world has ever seen. 
The production of crops per agricultural 
worker increased by about 58 per cent. within 
a half-century, while farm production per 
capita of population increased by about 39 per 
cent. The soil was fertile and yielded large 
crops. The desire to secure farm homes of 
their own was the incentive to our own people 
and to the thrifty immigrants from the farm- 
ing regions of Europe to work hard and for 
long hours. They produced immense quanti- 
ties of cheap food, which was used to build up 
industrial and urban life, both at home and 
abroad. Agricultural exports increased rap- 
idly and furnished the larger part of the money 

13 


OUR DEBT AND DUTY TO THE FARMER 


necessary to pay interest and principal on 
foreign capital borrowed to help develop this 
country. The natural result of this great sur- 
plus of cheap food and raw materials was the 
growth of the cities and the relative decrease 
of rural population. Our great superstructure 
of industry, transportation, and commerce was 
built upon the foundation of agriculture and 
can stand without injury only so long as the 
foundation is secure. 

Not only do farmers constitute the largest 
common group in our national life, but the in- 
vestment in agriculture far exceeds the invest- 
ment in any other industry. According to the 
census of 1920 the value of all farm property 
in the United States was almost $78,000,000,000. 
The capital invested in all manufacturing in- 
dustries was about $45,000,000,000; in mines 
and quarries, a little more than $7,000,000,- 
000; and in railroads, basing this capital on 
common and preferred stock and other obliga- 
tions outstanding, almost $21,000,000,000. 

The value of the live stock on the farms was 
more than $8,000,000,000, or only $700,000,000 

14 


FARMERS’ CONTRIBUTION TO NATION 


less than the capital invested in iron and steel 
and their manufactures. We properly regard 
our automobile industry as one of the great- 
est industries of the country, but the annual 
value of the dairy and poultry products from 
the farms exceeded the annual value of auto- 
mobile manufactures, while the value of dairy 
cows on the farms January 1, 1920, was 
$200,000,000 more than the capital invested in 
the automobile industry. The agricultural 
products of the United States, including the 
products of our forests, furnished in 1923 21 
per cent. of the tonnage and almost 29 per cent. 
of the revenue of our railroads, and in the 
Western district 36 per cent. of the tonnage 
and 42 per cent. of the revenue. When to the 
revenue of the railroads derived from agricul- 
tural products proper there is added the reve- 
nue received from the shipments of things to 
the farms, the importance of agriculture to our 
transportation systems becomes evident. 

The American farmer also uses and pays 
for a large volume of borrowed money. In 
1920 farm mortgage loans approached the 

15 


OUR DEBT AND DUTY TO THE FARMER 


$8,000,000,000 mark, and bank loans to farm- 
ers on personal and collateral security were 
almost one half of that amount. The interest 
paid out by farmers in that year alone has 
been roughly estimated at over $900,000,000. 
Commercial banks, life-insurance companies, 
farm-mortgage bankers, and various other 
credit agencies, as well as private investors, 
find profitable employment for their funds in 
the farm industry. It appears, for example, 
that farm loans in 1920 were about 18 per cent. 
of the total loans and discounts of commercial 
banks, and that life-insurance companies in 
1923 had almost as large a percentage of their 
admitted assets invested in loans on farm 
lands. The farmer is also an important patron 
of life, fire, and other forms of insurance. 
Premiums paid alone for fire protection on 
farms are estimated at well over $50,000,000 
annually. 

With the improvement of the farmer’s finan- 
cial condition, which began in 1897 and con- 
tinued up to 1920, he became a large and profit- 
able customer not only for things necessary to 

16 


FARMERS’ CONTRIBUTION TO NATION 


carry on farming but for almost everything 
bought by city dwellers—first-class furniture, 
clothing, musical instruments, automobiles, 
house-furnishings of all kinds, toilet articles, 
and in fact most of the conveniences of modern 
life. The growth of the farm market for such 
things contributed largely to the prosperity of 
the industries producing them. 

Heretofore the United States has never had 
to take thought of its food-supply. Always 
there has been an abundance and to spare. A 
study of population growth, however, makes it 
clear that before many years the case will be 
different. In the near future our population 
will have so increased that we shall need all the 
food we are now producing. Had the trend of 
our wheat production and consumption, for ex- 
ample, continued uninterrupted by war, it 
would seem that by 1940 the average annual 
consumption would have equaled the average 
annual production, and we should have to im- 
port wheat in years of low yields. As we ap- 
proach this new condition, prudence requires 
frequent examination of the physical and eco- 

17 


OUR DEBT AND DUTY TO THE FARMER 


nomic condition of agriculture, our basic in- 
dustry. At frequent stops in its journey 
across the continent experienced men pass 
along either side of the express-train and tap 
each wheel to make sure it is without flaw which 
might endanger the lives of its precious load. 
Just so wise statesmanship requires that we 
take frequent note of the condition of agri- 
culture to make sure that it is sound and can 
be depended upon to function smoothly and 
efficiently. 

The farmer’s part in making and maintaining 
the Nation is not confined to the production of 
material things. The open country breeds 
strong and self-reliant men and women, vigor- 
ous in mind and body, whose daily lives breathe 
the spirit of freedom and liberty and justice. 
Hence the farmer has always been the depend- 
ence of the Government in time of war and 
its balance-wheel when great national policies 
are being considered. The long days in the 
fields give time for thought and reflection. The 
rush and confusion of the cities, and the daily 
strife with competitors, are absent. Contact 

18 


FARMERS’ CONTRIBUTION TO NATION 


with the forces of nature gives the farmer 
broad vision, makes him deliberate, patient, 
tolerant, and not easily swayed by temporary 
emotions. Consequently the farmer has al- 
ways been the national stabilizer. It is he who 
has contributed the sober second thought and 
usually the deciding voice when great issues of 
government have arisen. He is instinctively 
conservative in his views, a strong supporter of 
law, of the protection of property, of lawful 
and orderly ways of doing things. If on oc- 
casion he may favor public measures which 
seem not in accord with his historic attitude and 
not in agreement with the views of those who 
are pleased to consider themselves the con- 
servative element, it is certain that conditions 
exist which require prompt correction, and no 
time should be lost in finding a remedy. 

Some one has said in effect that farmers 
never start a war but must carry it on and 
finish it. Armies cannot fight without food. 
Germany was able to fight most of the civilized 
world for four years because she had deliber- 
ately built up her agriculture against such a 

| 19 


OUR DEBT AND DUTY TO THE FARMER 


time of need. England and France would have 
been defeated but for the enormous food- 
supplies furnished by the farmers of the United 
States. Our farms furnished about 28 per 
cent. of the men with the colors, 1,120,000 of the 
4,000,000 in 1918. If it were possible to get 
at the full facts it would be found that the 
farmers contributed more than this percent- 
age, and if measured by fighting efficiency 
their contribution would appear still greater, 
for life on the farm develops qualities of 
the greatest value in the fighting man. In 
physical fitness also farm boys are superior. 
Colonel Leonard Ayres of the general staff re- 
ports that 100,000 country boys furnished 
4,790 more soldiers than an equal number of 
city boys. 

The grains, live stock, fiber crops, fruits and 
vegetables, and other products of the soil are 
all necessary to our well-being, but there is 
another crop produced regularly on the farm 
which is infinitely more precious, the crop of 
children. It is this crop which makes the farm- 
ers of the future and insures the continuance 

20 


FARMERS’ CONTRIBUTION TO NATION 


of our food-supply. The surplus of this crop 
above farm needs makes that steady stream of 
fresh, virile, potent blood which flows into the 
cities and is such an important contribution to 
the vital human forces of the Nation. 

It appears from the census of 1920 that the 
farms are carrying about four million more 
boys and girls under twenty-one years of age 
than the towns and cities. Of the total farm 
population but 49.5 per cent. are twenty-one 
years of age or older, while of the city popu- 
lation 62.5 per cent. are twenty-one years of 
age and older. The farms, therefore, are grow- 
ing, training, educating, and turning over to 
the cities at working age from three hundred 
thousand to four hundred thousand young folks 
each year. The character-making years of 
these future citizens are spent on the farm. 
Physical qualities and mental and moral habits 
are largely formed there. Most of their edu- 
cation is acquired there. Hence the importance 
of conditions which will develop crops of chil- 
dren of the highest quality. 

In ‘‘Wallaces’ Farmer’’ of May 9, 1924, H. A. 

21 


OUR DEBT AND DUTY TO THE FARMER 


Wallace presents an interesting study of the 
growth of population as shown by the census of 
1920. He estimates that to maintain our popu- 
lation at the present birth and death rate and 
with no immigration there should be on hand 
all the time 460 children under five years of 
age for every thousand women of child-bearing 
age, and that any growth must come from an 
excess of that number. He finds that in the 
better residence districts of the cities not 
enough children are born to maintain our pres- 
ent population and that the increase is coming 
from the working districts of the cities and in- 
dustrial centers and from the farms. In the 
better residence districts of the cities through- 
out the country the number of children under 
five years of age for each thousand native- 
born women of child-bearing age runs from 
about 260 to 350. In those wards in which the 
poorer classes live in the same cities the num- 
ber of children under five years of age runs 
from 450 to almost twice that number. When- 
ever the native Americans move to town or to 
States like California, the number of children 
22 


FARMERS’ CONTRIBUTION TO NATION 


in proportion to women of child-bearing age 
decreases. In California, for example, the 
number of children under five years of age to 
each thousand native American women of child- 
bearing age is about 330, or approximately the 
same as in the better residence districts of the 
cities, and 130 less than needed to maintain our 
population. The increase in population is com- 
ing from foreign-born and from native Ameri- 
cans who live on the farms. In Iowa there are 
540 children under five years of age per thou- 
sand women of child-bearing age, or 80 more 
than necessary to maintain the population. In 
North Dakota the number is 690, and in Ala- 
bama it increases to 790. 

The large increase in population is coming 
from the foreign-born whether they live in the 
cities or in the country. In the Hastern States 
there are 650 to 700 children under five years 
of age for each thousand foreign-born women 
of child-bearing age. In Iowa, Minnesota, 
Nebraska, and neighboring States, the number 
of children reaches 900, while in North Dakota 
the foreign-born women have 1240 children un-— 

23 


OUR DEBT AND DUTY TO THE FARMER 


der five years of age per thousand women of 
child-bearing age. From all of which he con- 
cludes: ‘‘The farms of the Middle West and 
the South are literally the breeding-grounds of 
the Nation. The farms of the United States 
produce every year from a third to half a mil- 
lion more children than is necessary to main- 
tain the farm population. These extra hun- 
dred thousands are sent to the cities every 
year, and the people left behind on the farm 
must proceed to their double task of feeding the 
cities both food and new blood. This double 
task takes an appalling amount of human en- 
ergy. The future of the cities of the United 
States seems eventually to lie in the quality of 
the blood sent them from the farms. The 
native-born in the cities are not producing 
enough children to maintain themselves. They 
are being replaced by the children of foreign- 
born parents and the children of the farms. 
Our greatest wealth is in the children of the 
next generation. The blood and education 
with which they are equipped determines in the 
24 


FARMERS’ CONTRIBUTION TO NATION 


long run whether our civilization is going up 
or down.’’ 

In view of the fact that about one third of 
the farm children are delivered to the cities at 
maturity, the general public has a direct inter- 
est in seeing that they have strong bodies, clear 
minds, good character, and a serviceable educa- 
tion. Incidentally, it would be no more than 
fair if the cities should contribute a substantial 
amount to the maintenance of rural schools 
inasmuch as they get one third of the product. 


25 


CHAPTER IIT 
THE DEPRESSION 


HE agricultural depression which began 
TT in 1920 has been the most severe yet ex- 
perienced in this country. It has been some- 
what more than simply a period of hard times 
such as farmers have had to go through every 
so often. It has been a financial catastrophe, 
of the most severe character, the full effect of 
which as yet cannot be measured. It has not 
been equally severe and prolonged in all parts 
of the country, but no region has escaped, and 
it is possible that some regions have yet to feel 
its full force. Neither has it been equally 
severe on all farmers in any region, for farm- 
ers like men in business and industry differ in 
ability, in resourcefulness in meeting hard con- 
ditions, and in financial reserves accumulated 

26 


THE DEPRESSION 


against time of need. Strange as it may seem, 
however, many of the most energetic, efficient, 
and intelligent producers on the best lands 
have been among those hardest hit. 

The depression was characterized by a gen- 
eral collapse in the value of farm products. It 
is safe to say that never before had farm prices 
undergone such drastic deflation. From a 
point 135 per cent. above pre-war levels in May, 
1920, farm commodity prices crumbled month 
by month until a year later they bottomed at 
only 10 per cent. above the levels they held 
before the war. 

The prices of some products were more com- 
pletely demoralized than others, as appears 
from figure 1. The farm price of cotton fell 
within a year from 37 cents to about 9 cents a 
pound, but thereupon rose again as a result 
of several short cotton crops. Wool prices 
dropped from 53 cents in January, 1920, to 15 
cents eighteen months later, but also recovered 
after 1921 because of a shortage in the wool 
supply and the protection given by the tariff. 
Dairy and poultry prices likewise slumped 

27 


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28 


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NOILWALIS IWHNLINDIYSV SAL 





THE DEPRESSION 


heavily but remained at relatively higher levels 
than prices of most other products. 

The crash in prices fell with special force on 
producers of wheat, corn, hogs, and beef cattle. 
Between June, 1920, and December, 1921, the 
average farm price of wheat dropped from 
$2.58 to 92 cents a bushel. In the same period 
corn fell from $1.85 to 41 cents, and the price 
of beef cattle was reduced by one half. Hogs 
that were selling at the farm for over 19 cents 
‘ a pound in the late summer of 1919 brought 
only 64% cents in the winter of 1921. What 
made the situation doubly difficult for produc- 
ers of these products was the fact that prices 
not only broke violently but remained near 
bottom levels during a protracted period. 

This demoralization in farm commodity 
values occurred at a time when large numbers 
of farmers were burdened with debt, and there- 
fore least able to absorb the loss. In the four 
or five years preceding the depression farmers 
had greatly extended themselves to meet the 
abnormal demand for food-stuffs, and many 
of them, as a result, had contracted heavy in- 

29 


OUR DEBT AND DUTY TO THE FARMER 


debtedness. To obtain the needed funds, 
farms were often heavily mortgaged. Between 
1910 and 1920 the total mortgage encumbrance 
on farms increased from $3,320,470,000 to 
$7,8597,700,000. During the same period the 
average mortgage debt reported for farms op- 
erated by owners rose from $1715 to $3356, 
even though there was no increase in the aver- 
age size of such farms. 

The total volume of mortgage encumbrance 
on farms in 1920 may not have been danger- 
ously large, but the debt was very unevenly 
distributed throughout the farming regions. 
Especially in the South and the West had 
mortgage debt accumulated. It should be ob- 
served also that the average encumbrance re- 
ported in 1920 does not adequately portray the 
situation. Many farms were free from debt or 
but slightly encumbered, while others were 
heavily burdened. A survey made in 1921 in 
the blue-grass region of Kentucky, for example, 
shows that 146 farms, which were only slightly 
larger than the average for the State, were 
mortgaged to the extent of $17,356 per farm, 

80. 


THE DEPRESSION 


whereas the average encumbrance reported for 
all farms in the State in 1920 amounted to only 
$1889. 

While the total debt burden of farmers just 
before the crisis was one of considerable magni- 
tude, yet the larger farm incomes and the 
higher land values at the time were sufficient to 
carry it. Had prices of farm products re- 
mained at 1919 and early 1920 levels, farmers 
in general would have had no difficulty in pay- 
ing their debts. When prices of both farm 
products and farm lands crashed without a 
corresponding reduction in farm expenditures, 
thousands of farmers were placed in a desper- 
ate plight. 

Under conditions such as these the collapse 
in prices could have only disastrous results. 
The value of farm lands dropped. Debts ac- 
cumulated, and delinquent taxes mounted. 
Farm buildings and equipment deteriorated, 
and great herds of live stock were dispersed. 
Children were kept out of school to work on the 
farm, and standards of living were reduced. 
Thousands of farmers were unable to weather 

31 


OUR DEBT AND DUTY TO THE FARMER 


the crisis, gave up their farms, and moved to 
town. 

Let us consider a little more in detail some 
of the effects of the depression. The average 
value of farm lands, the principal asset of 
farmers, declined about 27 per cent. between 
March, 1920, and March, 1924. Had the own- 
ers of these lands bought them in March, 1920, 
at their estimated value, and had they been 
compelled to sell them at their estimated price 
in March, 1924, they would have lost almost 
$18,000,000,000. Of course, this did not hap- 
pen. Not much land changed hands during 
these years except at forced sale or by volun- 
tary relinquishment to pay debt. The high 
land values in 1920 were in one sense paper 
values, and the decline in values since then was 
in the same sense a paper decline. The de- 
preciation in these values, however, had serious 
consequences for those who had obtained large 
loans on the basis of the higher valuation of 
their farms. 

While lands and other farm assets thus de- 
preciated in value, the load of debt grew larger. 

82 


THE DEPRESSION 


Mortgage encumbrance on farms increased 
rapidly after 1920, and according to some es- 
timates reached the sum of $10,000,000,000 in 
the early months of 1924. Many farmers were 
compelled to mortgage their farms for the first 
time since they acquired them, and others added 
still more to their mortgage encumbrance to 
satisfy creditors. Much of the new mortgage 
debt was contracted to pay off short-time loans 
and to defray interest, taxes, and operating 
expenses. The necessity of mortgaging their 
farms to pay off accounts which should be paid 
from current earnings shows how severely 
farmers were pressed. While some farmers 
were able to satisfy the demands of creditors by 
mortgaging their farms, others could not meet 
the situation in this way and sank into more 
hopeless debt. 

With the first drop in prices farmers were 
dazed. They could not believe that such ruin- 
ously low prices could continue, and they were 
encouraged in this view by bankers and busi- 
nessmen. They held on tenaciously, but, as the 
depression continued, more and more of them 

38 


OUR DEBT AND DUTY TO THE FARMER 


became discouraged and finally turned over 
their property to creditors. 

There is, unfortunately, no _ satisfactory 
measure of the financial losses suffered by 
farmers during the depression. There is, how- 
ever, sufficient evidence to indicate that their 
losses were enormous. In this connection the 
records of the bankruptcy courts are illuminat- 
ing. The total number of farm bankruptcy 
cases is never large, since farmers as a rule do 
not resort to the bankruptcy courts when com- 
pelled to give up property to creditors. But 
the relative increase in such cases is very sig- 
nificant. Before the war the number of farmer 
bankruptcy cases averaged 827. During the 
last four years ending June 30, 1924, the num- 
ber has averaged 4578. By far the greatest in- 
crease in these failures occurred in the South 
and the West as the accompanying chart shows 
(figure 2). 

It is well worth observing, also, that the 
number of failures has been gradually increas- 
ing since the early years of the depression. 

34 


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OUR DEBT AND DUTY TO THE FARMER 


The total number of bankruptcy cases involy- 
ing farmers rose from 997 in 1920, or 6.4 per 
cent. of all cases passing through the courts, to 
a total of 7772 in 1924, or 18.7 per cent of all 
_ cases concluded in that year (figure 3). 

The financial loss of farmers in the Middle 
West is more fully portrayed in a survey made 
in 1923 by the Department of Agriculture. 
This survey shows that about 814 per cent. of 
the owners of farms in fifteen corn and wheat 
States of that region lost their farms between 
January, 1920, and March, 1923. In addition 
another 1414 per cent. of the farm owners were 
in fact’ insolvent but retained possession of 
their farms through the leniency of creditors. 
Tenant farmers fared even worse. About 1414 
per cent. of the tenants lost their property, and 
another 20 per cent. were hanging on merely 
because their creditors were willing that they 
should, 

This picture of financial losses suffered by 
farmers might be still further enlarged, but it 
is unnecessary to rehearse more of these de- 

86 


BANKRUPTCIES AMONG FARMERS. 
UNITED STATES AND GEOGRAPHIC REGIONS, 1915-1924 


BANKRUPTCIES FISCAL YEARS ENDING JUNE 30 
NUMBER 





70-00 


6000 


5000 


4000 


$000 


20.00 


1000 


Bed vines 


0 
1915 1916 1817) «1918 i919 «1920 192) 1922 1923 wart 


FIGURE 3 


87 


OUR DEBT AND DUTY TO THE FARMER 


tails, since the facts are now quite generally 
known. It should be added, however, that the 
financial distress in some regions resulted in a 
pronounced breakdown in moral conceptions 
-as to financial obligations. A condition such 
as this could grow only out of acute suffering, 
for of all groups none consider themselves more 
firmly bound by moral obligations than the 
farmer group. 

Some will say that while the losses sustained 
by farmers have been serious and therefore to 
be regretted, yet after all the loss has fallen 
on the individual, and in this respect the farmer 
is no worse off than large numbers of business 
men who have suffered in the same way. 
This may be true, yet from the point of view of 
the Nation as a whole the shift that has taken 
place in the ownership of land during the last 
few years is a matter of serious importance. 
Most of the farms which have been foreclosed 
have not passed into the hands of other farmers 
who will farm them, but have been acquired by 
loan companies, banks, business men, or retired 
farmers. Some of the retired farmers may 

38 


THE DEPRESSION 


move back to the farm, but in most cases these 
farms will be rented, with the result of greatly 
swelling the number of tenant farmers. 

The farms of this country have always pro- 
dueed a surplus population. The movement 
from country to city, therefore, has been a con- 
tinuous one. But in periods of agricultural 
depression this drift has been accelerated. 
When the depressions have been of a temporary 
character, large numbers of young people have 
sought employment in cities for a time, and 
later have returned to the farms, when the rela- 
tive rewards of farming have risen. The 
movement away from the farms during the 
present depression seems to have been much 
larger than at any previous time. The net 
shift of population from country to city in 1922 
has been placed at 1,120,000 persons, or about 
3.6 per cent. of the agricultural population at 
the beginning of that year. Other estimates 
indicate that another million people left the 
farms during 1923. Dire economic necessity 
literally drove hundreds of thousands away 
from the farms. 

39 


OUR DEBT AND DUTY TO THE FARMER 


While farmers have borne the brunt of the 
depression, other groups and interests have 
suffered with them. Business concerns that 
depended upon farm customers sustained serl- 
. ous losses. The sales of implement and ferti- 
lizer companies slumped heavily, and many 
of the weaker concerns were driven into 
bankruptcy or receivership. The decreased 
purchasing-power of the farmer was reflected 
in business generally. The advertising carried 
by agricultural papers tells the story in part. 
Between 1910 and 1920 both the circulation and 
advertising patronage of agricultural papers 
all over the country increased enormously, and 
in the winter of 1919-20 these weekly maga- 
zines were carrying advertising almost as great 
in its variety as that carried by the publications 
designed especially for city readers. To meet 
the great demand for advertising, farm papers 
were running from two to four times the num- 
ber of pages they had carried before the war. 
Beginning in the fall of 1920, however, the ad- 
vertising patronage of the agricultural press 


40 


THE DEPRESSION 


all but shriveled up. Advertisers had discov- 
ered that farmers could not buy. 

The effects of the agricultural depression on 
business is clearly reflected in the failure of 
banks. During the four years ending June 30, 
1924, a total of 1960 banks failed, as compared 
with only 202 during the four pre-war years 
1910-18. Bank losses, as shown in figure 4, 
have been especially severe in the agricultural 
sections of the country. 

Many of these failures no doubt resulted 
from unsound banking methods, over-com- 
petition between small institutions, and in 
some cases from the dishonesty of bank officers. 
It is quite evident, however, that a major cause 
of the breakdown was the enormous drop in 
value of farm products and property, and the 
shrinkage in the income of farmer customers. 

It was natural that bank failures should be 
relatively fewer during the early part of the 
depression, because bankers, like farmers, 
hoped that the decline in farm prices would be 
temporary. As time went on, however, and 
farmers were unable to pay their accounts, 

41 


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42 


BANK FAILURES 
UNITED STATES AND GEOGRAPHIC REGIONS, 1915-1924 


BANK FISCAL YEARS ENDING JUNE 30 
FAILURES 
NUMBER 


90 


o 


oO =) 


80 


70 


600 





500 


400 


300 eels 
200 obs ieee 

South 
100 IN z 


0 









United States *) 


ane Middle met 


| 
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—. 






5. +1916 +~«=91917.,—té<‘<‘XGSC*«‘dS:«~=«dQ@O.~=«SG|N~SC«dNGV!N!~=Ss192!3.— 1 


FIGURE 5 


43 


OUR DEBT AND DUTY TO THE FARMER 


banks toppled at an increasing rate (figure 5). 

This picture of the depression would be 
gloomy indeed, were it not possible to record 
material improvement. Measured by the 
'farmer’s income and its purchasing power the 
low point in the depression was reached in 1921, 
Since that time there has been a slow but fairly 
steady increase in the prices of farm products 
and an improvement in the relation between 
these prices and the prices of things the farmer 
must buy. Measured by its effect, the full 
force of the depression in many regions was 
not reached until 1923 and 1924. Farmers who 
were in fact insolvent in 1921 were sustained 
for one, two, or three years by extensions of 
credit and leniency of creditors, and by char- 
acteristic optimism. As time went on, more 
and more of these farmers had to give up and 
turn over their property to creditors. It is 
fair to say, however, that the condition of the 
farmer has been gradually improving since the 
dark days of 1920 and 1921. 


44 


CHAPTER IV 


OAUSES OF THE DEPRESSION 


of the depression. Chief among them 
was the war-time stimulus to production, which 
eventually brought about an oversupply of 
farm products and a rapid decline in farm 
prices. Another influence was a credit policy 
that first inflated prices and then contributed 
to their deflation. Still another cause was the 
uneven character of the price decline, which 
brought about a distorted relationship between 
the prices of the things the farmer has to sell 
and the prices of the things he has to buy. 
Crops of 1920 and the years following were 
produced at exceedingly high costs. Farm ex- 
penses were further increased by larger debts 
and higher taxes. Freight rates and distrib- 
uting costs mounted. As a result the pur- 

45 


Nee let us inquire what were the causes 


OUR DEBT AND DUTY TO THE FARMER 


chasing-power of the farmer dropped to the 
lowest point in a generation. 

it was not to be expected that prices of farm 
products would remain at war levels or as 
-high as they continued during 1919 and a part 
of 1920. Readjustment to a peace-time basis 
was inevitable and was expected. Had this 
readjustment been general and had it included 
prices of the things the farmer had to buy, all 
farmers except those heavily in debt would 
have got along very well. But it was not gen- 
eral. While farm products suffered a drastic 
decline in prices, other commodities remained 
at or near war levels. 

Why did prices of farm products decline? 
Evidently it was due to overproduction. 
Many good people dislike the use of the word 
‘‘overproduction’’ as related to food. They 
insist that there is no such thing as overpro- 
duction so long as there is a hungry man or 
woman in the world. Everything we produce 
is consumed, they say, and still there are 
hungry people. But from the angle of the pro- 

46 


CAUSES OF THE DEPRESSION 


ducer there is overproduction whenever he is 
not able to sell his total crop for a sum large 
enough to pay farm labor relatively as well as 
city labor and return a reasonable profit on 
capital invested in agriculture. Production in 
excess of effective demand broke prices of 
farm products in 1920 and 1921. But what 
accounts for the excess production? To an- 
swer this question we must go back and con- 
sider what happened during the war. 

At the beginning of the war agriculture in the 
United States was in a fairly prosperous con- 
dition, and had been for a number of years. 
The consuming power of our growing popula- 
tion gradually had been overtaking farm pro- 
duction. The American farmer was depending 
less and less upon foreign markets. From 1900 
there had been a gradual advance in farm 
prices. As the war progressed, it became evi- 
dent that it would last for some time and that 
there would be an increasing foreign demand 
for the products of our farms and of some of 
our industries. Prices of farm products rose, 

47 


OUR DEBT AND DUTY TO THE FARMER 


and gradually more land was brought under 
cultivation to meet the probable increase in 
demand. 

As the war progressed and more men were 
‘drawn into the armies of Europe, food produc- 
tion in Europe decreased. At the same time, 
the use of submarines endangered food ship- 
ments on the seas. The relative nearness of 
the United States to Europe and our large loans 
and credit advances to the allied nations in- 
creased their purchases from us. Advancing 
prices naturally stimulated production. Dur- 
ing this period, however, our agriculture was 
not seriously thrown out of balance. 

From the date when the United States en- 
tered the war the important part to be played 
by the farmer was emphasized in every possible 
way. ‘‘Food will win the war,’’ became the 
rallying-cry. The patriotism of the farmer 
was invoked. Men and women who knew little 
of agriculture but knew how to make emotional 
appeals were sent into the agricultural regions. 
Production campaigns were organized in every 
State, county, and township. Large sums were 

48 


CAUSES OF THE DEPRESSION 


given by Congress for the use of the Depart- 
ment of Agriculture and the agricultural col- 
leges jn campaigns to enlarge the cultivated 
area and stimulate production. In an address 
delivered in 1918 the Assistant Secretary of 
Agriculture said that ‘‘within three days after 
the declaration of war the Department of Agri- 
culture and representatives of the Land Grant 
Colleges and the State Commissioners of Agri- 
culture initiated an agricultural war program, 
which, with the aid of the farmers’ organiza- 
tions and the agricultural press, was executed 
with remarkable results.’? The number of 
county agricultural agents was much enlarged, 
and the increased acreage desired for various 
crops was mapped out systematically county by 
county. Committees were formed in cities to 
promote the growing of vegetables on vacant 
city lots. Investigations were made to learn if 
any farm lands were being held out of use. 

In short, every effort was made to convince 
the farmer that it was his duty to grow the 
largest possible amount of food. Government 
help was given. Federal funds were appropri- 

49 


OUR DEBT AND DUTY TO THE FARMER 


ated for seed and other expenses. Additional 
sums were made available to be loaned on farm 
land. Bankers were given to understand the 
importance of freely extending credit to farm- 
ers for production purposes, and farmers were 
encouraged to borrow to the maximum. The 
drainage of young men from the farms reduced 
the supply of farm labor, and farmers were en- 
couraged to buy tractors and improved imple- 
ments which would enable them to increase 
production with the least labor. Special ar- 
rangements were made with manufacturers to 
sell tractors at cost, and so-called traetor 
schools and demonstrations were promoted. 
Farm boys at military camps were given fur- 
loughs to work on farms. 

The farmers responded to this call for 
larger production. No class of people are 
more responsive to patriotic appeal. After 
furnishing Uncle Sam with more than one 
fourth of all his fighting men, those who re- 
mained on the farms, the women and the boys 
and girls, filled the gaps, and produced more 
food than we had ever before produced with 

50 


CAUSES OF THE DEPRESSION 


the same amount of land and labor. It was this 
food which won the war. It was produced 
under great difficulties and at steadily in- 
creasing costs. The speeding up of all indus- 
tries needed for war purposes resulted in an 
increased demand for labor at greatly in- 
creased wages. This added to the difficulties 
of the farmer. The iniquitous cost-plus system 
adopted by the Government made his difficulties 
still greater, lessening the efficiency of labor 
and advancing wages beyond reason. So the 
farmer worked longer hours. His wife and his 
boys and girls in large numbers did the work of 
men in the fields. The prices of farm products 
rose, but so did the cost of production. 

The farmer did not strike nor threaten 
to strike. He worked by the sun and not by the 
clock. He exacted no contract that his pro- 
duction must be taken at a definite price. On 
the contrary, he submitted to control of prices 
which was not imposed upon other industries 
and which resalted in much lower prices than 
otherwise he would have received. Production 
of war supplies in other industries was largely 

51 


OUR DEBT AND DUTY TO THE FARMER 


stimulated by allowances for increased costs 
and by formal or implied contracts, which in 
most cases gave the producers assurance both 
of immediate profits and protection against 
‘financial loss if peace should come. After the 
war the Government paid claims to holders of 
formal contracts to the amount of $247,676,034 
and on informal contracts $257,614,906. No 
indemnity was paid to farmers. In other in- 
dustries there were few restrictions as to prices 
and profits. Production in agriculture was 
stimulated by emotional appeals to patriotism. 
In a statement issued by the Food Administra- 
tion in the spring of 1918 the results of its 
work in this direction were summarized as 
follows: 


Above all the Food Administration has tried and 
believes it has in large measure succeeded, with the 
aid of the Department of Agriculture and other gov- 
ernment and individual agencies, in stimulating pro- 
duction of needed war foods through appeals and en- 
couragement to farmers to produce food, and by 
pointing out specifically to them what, why and how 
much certain things were needed. 

52 


CAUSES OF THE DEPRESSION 


Under the powerful stimulus of patriotic ap- 
peal, easy credit, special financial assistance, 
and high prices, our farmers extended them- 
selves to the utmost in the production of food. 
Pastures and meadows were plowed up. Es- 
tablished crop rotations were disregarded, 
equipment and land were purchased or rented, 
and new lands were brought into cultivation. 
In short, the farmers of the United States 
threw themselves into the task of winning the 
war and grew the largest possible amount of 
food without regard to cost or possible after- 
effects. 

Emphasis was put on the need of increased 
supplies of wheat and meat, the production of 
the latter meaning, of course, an increased sup- 
ply of corn, the principal feed for meat- 
producing animals. At the same time steps 
were taken to reduce the domestic consumption 
of wheat and meat. Regulations were enforced 
as to the use of wheat. The amount which 
might be bought was partially limited. Fora 
time consumers were required to buy a certain 
amount of wheat substitutes when they bought 

538 


OUR DEBT AND DUTY TO THE FARMER 


flour. While there were no regulations to limit 
meat consumption, wide-spread appeals for re- 
duced consumption were made. The country 
was placarded with great pcsters: ‘‘Save 
Meat—Save Wheat—Food will win the War.’’ 
Bills of fare in public eating-houses carried 
similar legends. Thousands of volunteer speak- 
ers addressed audiences on every possible oc- 
casion making the same plea. 

The result was a substantial reduction in the 
domestic per capita consumption of both wheat 
and meat, which continued after the war ended. 
The per capita disappearance of wheat for food 
and feed averaged 5.38 bushels during the pre- 
war years 1909-13 as compared with 5.04 
bushels during the period 1914-20. The per 
capita consumption of meat, which averaged 
151.3 pounds before the war, dropped to 130.7 
pounds in 1917, and averaged 139.9 pounds dur- 
ing the years 1914-20. 

Students of agricultural conditions who 
ventured to question the wisdom of the agri- 
cultural policies followed by the Government 
during the war got scant hearing and were even 

54 


CAUSES OF THE DEPRESSION 


suspected of disloyalty. The farmers were as- 
sured over and over again that they need have 
no fear of overproduction, that even if the war 
should come to an end there was a starving 
world overseas which would take all they could 
possibly produce and would take it at profit- 
able prices. | 

But the stimulus and incentive to augmented 
production did not cease with the Armistice. 
The war had prostrated agriculture in many 
parts of the Continent. The countries whose 
exports to the warring nations had been prac- 
tically dropped during the war were not pre- 
pared to fill the void in Kurope’s food supply. 
Furthermore, extensions of credit to Hurope, 
both by our Government and by commercial 
agencies, continued in large volume, and this 
fact, coupled with inflation of currencies, 
temporarily bolstered up the buying-power of 
Kurope. The demand for American food- 
stuffs was therefore continued with great in- 
tensity, and prices of farm products rose to un- 
paralleled heights. High prices were not the 
only incentive to still greater production. 

55 


OUR DEBT AND DUTY TO THE FARMER 


Government officials, economists, commercial 
and agricultural editors broadcasted the doc- - 
trine of permanently high prices. Relief un- 
dertakings to feed the stricken regions of 
‘Europe were launched by our Government and 
by various charitable agencies, and farmers re- 
ceived every encouragement to maintain their 
production. 

This speeding up of production resulted in 
the accumulation of large supplies of food- 
stuffs which after the war had to compete with 
the supplies which had piled up in Argentina, 
Australia, and other distant lands, and which 
were now moved to the world markets. In 
the face of this situation it is plain that war 
prices could not hold. European countries con- 
tinued to need large amounts of farm products, 
but their ability to buy was reduced by currency 
troubles and industrial chaos. Heavy buying 
during and immediately after the war was 
based largely on public credit and large loans 
from the United States. When these supports 
were withdrawn, purchases of supplies at high 
prices could not be continued. Though our ex- 

56 


CAUSES OF THE DEPRESSION 


ports to Europe continued to be large after 
prices collapsed, they were heavy, not because 
Europe possessed the buying-power to sustain 
this business on a profitable footing for our 
farmers, but because our surpluses were so 
large that we had to get rid of them at any 
price. While, however, this profound change 
in the supply and demand situation was no 
doubt the main cause of the price drop, it was 
unnecessarily strengthened by unwise agitation 
for lower living costs and by a policy of defla- 
tion. 

Through the attorney general’s office the ad- 
ministration in the fall of 1919 launched a 
erusade against high prices. Government 
stocks of food were advertised at bargain 
prices through the post-offices, and government 
wool was sold at public auction to the highest 
bidder. It was announced that these supplies 
would not be exported but would be thrown on 
the home market, and retailers were urged to 
handle them at cost. These supplies, which the 
Government had accumulated for war pur- 
poses fell upon a market already congested and 

57 


OUR DEBT AND DUTY TO THE FARMER 


on the verge of collapse. Many of the very 
government officials who had urged the farmer 
to produce now lent their influence to the cam- 
paign to break prices. The efforts to ‘‘reduce 
- the cost of living’’ had as their main objective 
a break in the price of farm products. A very 
different policy was followed with the surplus 
of other materials. These were held off the 
market and carefully fed into it afterward, with 
the express purpose of avoiding a break in 
prices as far as possible. 

Another influence in breaking farm commod- 
ity prices was the credit policy adopted by the 
Government both before and during 1920. 
With our entry into the war, credit inflation 
was adopted as a war measure. '‘l'o secure 
funds for the prosecution of the war, the 
Treasury resorted to heavy borrowings 
through the sale of war bonds and short-term 
certificates. But these bonds and certificates 
could be sold only by manufacturing additional 
credit at low interest rates. The policy of the 
Federal Reserve System accordingly was sub- 
ordinated to the policy of the Treasury, and 

58 


CAUSES OF THE DEPRESSION 


discount rates were maintained at artificially 
low ‘levels, not only during the years of the 
war but to the end of 1919. 

One effect of this policy was a tremendous 
expansion in the loans and discounts of banks. 
Between June 30, 1914, and June 30, 1920, bank 
loans and discounts for the country as a whole 
increased over 100 per cent., while in certain 
States, particularly in the West and South, the 
expansion ranged as high as 252 per cent. 
This inflation of credit appears to have been 
especially pronounced between 1918 and 1920, 
when farm mortgage and short-time loans are 
estimated to have increased roughly 50 per 
cent. 

The inflation of credit had far-reaching con- 
sequences. In the opinion of the Congres- 
sional Joint Commission of Agricultural In- 
quiry, which made an extended investigation 
of the subject, the credit policy of the Govern- 
ment materially stimulated expansion, ex- 
travagance, and speculation. The policy was 
continued throughout the year 1919 after the 
war was over, even though ‘‘at this time the 

59 


OUR DEBT AND DUTY TO THE FARMER 


tendency toward expansion, speculation, and 
extravagance was beginning to be apparent.’’ 
The commission held, and its opinion is sup- 
_ ported by that of other authorities, that a seri- 
ous error was made in not advancing discount 
rates in the early part of 1919, and that if this 
had been done ‘‘the difficulties, hardships, and 
losses which occurred in 1920-21 as a result of 
the process of deflation and liquidation would 
have been diminished.’’ 

The brakes on inflation were finally applied 
in the closing months of 1919 and during 1920 
when the discount rates were substantially in- 
creased. The average rate of rediscount at the 
twelve reserve banks was advanced from 4.19 
per cent. in October, 1919, to 4.90 in January, 
1920. When this advance did not prove effec- 
tive, the rate was increased steadily month by 
month until it reached 6.48 in December, 1920. 
In the case of the St. Louis and Kansas City 
banks the advance in rates was considerably 
more marked. The average rate charged on 
bills discounted at the Kansas City Federal 
Reserve Bank, for example, rose from 4.60 

60 


CAUSES OF THE DEPRESSION 


in October, 1919, to 7.41 in November, 1920. 
The practical effect of this policy was to 
curtail further extensions of credit and to 
set in motion the forces of liquidation. Be- 
tween June, 1920, and June, 1921, bank loans 
and discounts were contracted by $2,321,000,000 
or 7.4 per cent. for the country as a whole, and 
in various Western and Southern States the 
reduction was relatively very much more. 
‘When finally the Federal Reserve Board,’’ to 
quote the commission’s report, ‘‘adopted the 
policy of restriction of expansion of loans and 
discounts and of speculation and extravagance, 
loans and discounts, currency and prices had 
reached such a point that deflation was a proc- 
ess accompanied by perpendicular and very 
material declines of prices accompanied by 
great losses and hardship upon banks, com- 
munities, and individuals alike.’’ 

The policy of inflation followed by drastic de- 
flation had serious results for the farmer. 
During the period of inflation and rising prices 
he was led to extend himself and incur liabil- 

ities beyond safe and reasonable bounds. The 
61 


OUR DEBT AND DUTY TO THE FARMER 


adoption of a drastic policy of deflation, at a 
time when farmers were extended to the ut- 
most, resulted in forcing crops and live stock 
upon the market when prices were rapidly de- 
| clining and purchasers were afraid to buy in 
advance of their needs. The check which in- 
dustry also suffered, and the accompanying 
unemployment, contributed to narrow the 
farmer’s market. It is no doubt true, as the 
investigations of the commission show, that 
the liquidation of industrial paper for the 
country as a whole was more rapid in 1920 and 
1921 than the liquidation of farm paper, but this 
was largely because the farmer simply could 
not pay. The crops of 1920 did not sell for 
enough to cover the bare cost of production, 
and, after paying his running expenses, the 
farmer had nothing left to apply on his debts. 
The pressure of liquidation may be indicated as 
well by the reduction of deposits as by a reduc- 
tion in loans and discounts. The report of the 
commission shows that the total deposits of 
banks in a group of agricultural counties 
dropped 11.1 per cent. as compared with 4.4 per 
62 


CAUSES OF THE DEPRESSION 


cent. in a group of industrial counties. In the 
agricultural counties demand deposits alone de- 
clined a total of $469,452,955, whereas in the 
same period loans and discounts were reduced 
only $36,548,648. Evidently farmers were un- 
able to sell their products for enough to liq- 
uidate their bank loans, and even withheld 
their deposits to pay store and other pressing 
accounts. 

The commission, in short, blames government 
agencies for much of the inflation which caused 
prices and costs of production to soar, and for 
failure to check the inflation in time. It also 
blames the Government for adopting a drastic 
policy of deflation just at the time when a re- 
verse policy should have been adopted. ‘T'o 
quote its own language: ‘‘The Commission be- 
lieves that a policy of sharp advance in dis- 
count rates should have been inaugurated in 
the first six months of 1919, and cannot ex- 
cuse the action of the Federal Reserve Board 
and the Federal reserve banks in this period in 
failing to take measures to restrict the expan- 
sion, inflation, speculation, and extravagance 

63 


OUR DEBT AND DUTY TO THE FARMER 


which characterized the period... A policy 
of lower discount rates and greater liberality 
in extending credits could have been adopted in 
the latter part of 1920 and the early months of 
1921, and such a policy would have retarded 
the process of liquidation and thus spread the 
losses incident to the inevitable decline of prices 
to a lower level over a longer period and that 
the adoption of such a policy at that time would 
have been advisable.’’ 

The sudden and continued rise in our dis- 
count rates affected world conditions as well 
as domestic conditions. It was no doubt un- 
favorable to foreign purchasers of our prod- 
ucts, even though our agricultural exports con- 
tinued and even increased. When considering 
the effect on agriculture of deflation and credit 
restriction, it must be kept in mind that the 
farmer suffered not alone from that policy as 
applied directly to him but as it affected in- 
dustry and business generally, at home and 
abroad. 

The drop in prices of farm products was 
not accompanied by a corresponding decline 

64 


CAUSES OF THE DEPRESSION 


in the cost of production. While prices of 
farm products crashed in 1920, the prices of 
land, labor, implements, and various supplies 
climbed in that year to unparalleled heights. 
Since then there has been some reduction in 
costs, but even in 1924 the costs of important 
factors in production have been much higher 
relatively than the prices paid for most farm 
products. This widening of the margin be- 
tween prices of farm products and the cost of 
production has resulted in heavy losses to farm- 
ers in all sections of the country. 

Some idea of the trend of these costs for 
the country as a whole is given in figure 6. 
The effect of high production costs was felt 
more severely in some regions than in others. 
In the Corn Belt the value of an acre of corn 
in 1921 was 20 per cent. under the pre-war 
value, whereas monthly wages of farm labor 
were 34 per cent. higher, land-values 117 per 
cent. higher, implements from 66 to 92 per cent. 
higher, and freight rates about 60 per cent. 
higher. Other regions had a similiar experi- 
ence. The farm value of an acre of wheat in 

65 


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66 


CAUSES OF THE DEPRESSION 


North Dakota in 1921 was only 11 per cent. 
greater than before the war; but monthly farm 
wages remained 42 per cent. higher, threshing 
rates 60 per cent. higher, and land values 61 
per cent. higher. The average value of an acre 
of cotton dropped in 1921 to 9 per cent. below 
the pre-war level; monthly wages remained 33 
per cent. higher than before the war, the price 
of cotton-picking 71 per cent. higher, the price 
of ginning 56 per cent. higher, retail prices of 
acid phosphate 27 per cent. higher, and retail 
prices of farm machinery 70 per cent. higher. 
Cattle prices in the range country dropped in 
1921 below pre-war levels; prices of land, labor 
and barbed wire, on the other hand, remained 
from 46 to 74 per cent. above 1913 prices. On 
the other hand, milk prices in the Hastern 
dairy regions did not fall in 1920 and 1921 as 
fast as the price of feeds, and it was not until 
1922 and 1923, when milk prices declined to 
still lower levels, that dairy farmers in the 
East began seriously to feel the effects of the 
depression. 

While studies of production costs show that 

67 


OUR DEBT AND DUTY TO THE FARMER 


farmers in all parts of the country have suf- 
fered heavy losses, the amount of these losses 
has varied widely between individuals and be- 
tween regions. Yields have an important in- 
fluence on costs. A recent study of wheat 
shows that the cost per bushel for farmers who 
had yields of 19 to 25 bushels per acre was 31 
per cent. less than for those who had yields of 
7 to 13 bushels. Even during the war years 
poor yields prevented many farmers in the 
wheat country from profiting by the high prices 
for wheat. In the Cotton Belt the ravages of 
the boll weevil in some States have prevented 
farmers from profiting by improved prices. 
The value per acre of cotton in Georgia, for ex- 
ample, was greater than the average for Texas 
or for the United States until 1919, but it has 
since decreased until in 1923 it was worth $18 
per acre less than the average for Texas and 
about $14 less than the average for the United 
States. 

One of the most serious phases of the situa- 
tion was the heavy indebtedness incurred by 
farmers during and after the war. Interest 

68 


CAUSES OF THE DEPRESSION 


charges on this debt alone since 1919, according 
to recent estimates, have absorbed from 5.7 to 
7.7 per cent. of the gross income of farm op- 
erators. During the years when farming was 
profitable it was not difficult to meet payments 
on both interest and principal. When prices 
dropped, however, hundreds of thousands of 
farmers were unable to pay even the interest. 

This burden of debt resulted from various 
causes to which reference has been made be- 
fore. The rise in prices of farm products and 
of farm land, easy credit conditions, and the 
well-nigh universal demand for greater pro- 
duction stimulated farmers to borrow freely 
and to expand their farm operations and ex- 
penditures beyond their earning capacity 
in normal times. A considerable number of 
them also were caught in the wave of land 
speculation which swept some parts of the 
country. 

Shortly after 1900 the selling price of farm 
lands began a more rapid advance. This ad- 
vance was greatly accelerated by the higher 
prices for farm products during the war years, 

69 


OUR DEBT AND DUTY TO THE FARMER 


and reached its peak in the winter of 1919-20. 
As the prices of all commodities remained high, 
many reached the conclusion that a_per- 
manently higher price plane had been es- 
tablished and that farm products and farm 
land had reached a secure position on thig 
plane. In some of the more productive agri- 
cultural regions rising land prices generated 
a speculative fever. In Iowa, for example, it 
was not uncommon to hear it said that there 
would never be cheap corn or cheap cattle or 
cheap hogs again, and that the best plowland 
would not stop advancing in price until it 
reached $1000 per acre. This land boom was 
nourished by commercial and other booster 
clubs, business men, bankers, and the daily and 
weekly urban press, which delighted in report- 
ing the sales of farms at high prices as evidence 
of the prosperity of community, county, or 
State. In this way many people have formed a 
wrong idea of the relation between land specu- 
lation and the agricultural depression. 

The real speculation was carried on not so 
much by farmers as by business men, and es- 

70 


CAUSES OF THE DEPRESSION 


pecially bankers, in the country towns. Farm- 
ers were not the cause of this speculation but 
the victims of it. Many farmers sold their 
farms because they were offered what they 
considered high prices for them. Some who 
sold moved to town with the expectation of 
taking life easy and living on their income. 
Others bought farms which they thought were 
better worth the money and moved upon them. 
A large percentage of these sales were made 
on contract, calling for a rather small payment 
down and yearly instalments until a mortgage 
would carry the balance remaining. These 
contracts provided for forfeiture in case the 
payments of principal and interest were not 
met. When prices dropped in 1920 many — 
thousands of purchasers of farms were not 
able to meet their payments. The sellers 
usually extended the time. They wanted the 
money, not the farms. The shrewder buyers, 
fearful of the future, gave up their contracts, 
took the loss of payments already made, and 
turned back the farms. Others hung on for 
one, two, or three years, and thus increased 
71 


OUR DEBT AND DUTY TO THE FARMER 


their losses. Large numbers of farmers who 
had sold and moved to town were thus obliged 
to move back upon their farms, even though 
they had the advantage of payments received. 
The case was much worse with those who, hav- 
ing sold one farm, bought another with the 
expectation of using the money received for 
the first to pay for the second. Their losses 
were much heavier, and large numbers of them 
were wiped out financially. 

Many renters, who especially prospered dur- 
ing the years of high prices because they got 
the benefit of these prices without such a 
marked increase in expense, sought to pur- 
chase farms for themselves. A large percent- 
age of these lost their lifetime savings which 
they had put into first payments on these farms. 
Of 44 tenants who bought farms during the 
boom in the blue-grass region of Kentucky, 16 
voluntarily gave up their farms and lost an 
average of $5678 each, 26 had to be granted ex- 
tension of time, and 2 sold because they could 
not meet their payments. Many farmers 
mortgaged their own farms to help buy farms 

72 


CAUSES OF THE DEPRESSION 


near the old homestead for sons returned from 
the war. These suffered the common fate. 
Many of the sons lost all they had saved, and 
in not a few cases the fathers in addition lost 
their own farms. 

Few farmers really speculated in land, using 
that term as it is commonly understood. The 
speculation was carried on by men in the small 
towns and cities whose sole purpose was to buy 
and sell just as speculators on the grain 
exchange buy and sell grain for a profit with 
no thought of ever taking the grain. Many 
bankers were especially active, and some made 
arrangements with unscrupulous land sales- 
men and were guilty of thoroughly discredit- 
able practices. Not a few banks failed be- 
cause of land speculation by one or more of 
their officers. 

It is not possible to state how much land 
changed hands during the speculative period, 
but from the best estimates perhaps not to ex- 
ceed 10 to 15 per cent., or possibly less, because 
many farms were sold several times. The 
farmer suffered from land speculation, not be- 

73 


OUR DEBT AND DUTY TO THE FARMER 


cause he had much part in it, but because it 
resulted in artificial land values, which in- 
creased his taxes and rent, gave him an opti- 
mism which was not justified, and led him to in- 
eur expenses which otherwise he would have 
avoided. 

Land speculation by non-farmers is a curse, 
injuring both the man who farms and the con- 
sumer who must buy what he produces. Some 
time, perhaps, we may find a way to keep the 
speculator from meddling with farm land. 

Taxes on farm property have enormously in- 
creased during the last few years. As shown 
in figure 7, State and local taxes paid by 
farmers went up about 146 per cent. between 
1914 and 1923, whereas the gross value of all 
farm products had declined by 1923 to 57 per 
cent. above the 1914 level. The tax on farm 
land alone advanced from an average of 31 
cents per acre in 1914 to 69 cents an acre in 
1922, an increase of 124 per cent. 

There are several ways of measuring the 
burden of farm taxes. Total farm taxes, which 
in 1913 absorbed 4.9 per cent. of the gross value 

74: 


CAUSES OF THE DEPRESSION 


of all farm products, absorbed almost 7 per 
cent. of such values in 1923. The relation of 


PROPERTY TAXES AND GROSS VALUE OF FARM PRODUCTS 
UNITED STATES, 1914-1923 







PER CENT 


pValue of Farm Products 
200 








iy Sepa SAREE EBL RE MORESO TRL NT lgenae —  PAR REAE (O EREENCES RSONES 
1944 861915 1916 1917 1916 1919 1920 192) 1922 1923 1924 





FIGURE 7 


taxes to the net earnings of land is an even bet- 

ter measure of the burden. The tax on repre- 

sentative Ohio farms advanced between 1913 
75 


OUR DEBT AND DUTY TO THE FARMER 


and 1922 from 78 cents to $1.72 per acre or 121 
per cent., whereas the net cash rent received 
from these farms increased but 26 per cent. 
In Northwestern Missouri, the tax per acre in- 
creased from 35 cents in 1913 to 96 cents in 1922 
or 174 per cent., while the net cash rent during 
the same years increased only 28 per cent. In 
1919 the real-estate taxes on a group of Indiana 
farms amounted to 12 per cent. of the net rent; 
in 1923 these taxes absorbed 40 per cent. of the 
rent. 

Farm taxes, in short, were materially ad- 
vanced at a time when prices of farm products 
sharply declined and when farmers were least 
able to pay them. Higher taxes have absorbed 
too large a part of a dwindling farm income. 
During the war, when prices were high and the 
purchasing-power of the tax dollar was rel- 
atively low, taxes were kept within bounds, 
After the war, however, the pressure of high 
prices which increased the expenses of govern- 
ment, and the resumption of public improve- 
ments, made tax levies higher than ever before. 
Obligations incurred for public purposes must 

76 


CAUSES OF THE DEPRESSION 


be met with funds raised by taxation, and will 
continue until paid whether times are good or 
bad on the farm. The necessity of paying these 
taxes added to the burdens of the farmer. 

- The increase in freight rates on agricultural 
products ranged from 50 to almost 150 per 
cent. Coupled as they were with ruinously low 
prices for farm products, these increased costs 
of transportation imposed a serious burden 
upon the farmer, as the following illustrations 
will show. In the fruit country of the Western 
Coast the increased freight tax on an acre of 
lemons amounted to $187.67, or the equivalent 
of interest at 7 per cent. on the sum of $2681. 
One hundred and fifteen crates of oranges were 
required to pay the freight in 1921 on a car- 
load of oranges from California to New York 
as compared with 75 crates in 1913. A car- 
load of wheat could be shipped from western 
North Dakota to Chicago in the fall of 1913 for 
the price of 248 bushels of wheat; in September, 
1921, 40 bushels more were required to pay the 
freight. In 1913, the cost of shipping a car- 
load of sheep from Idaho points to Chicago was 

77 


OUR DEBT AND DUTY TO THE FARMER 


equal to the value of 5240 pounds of live mut- 
ton at Chicago prices, but in the fall of 1921 the 
‘ost of a similar shipment required 7040 pounds 
of mutton. In November, 1913, the freight 
charge for a car-load of hogs from central Iowa 
7 points to Chicago was equal to the value of 5150 
pounds of hogs, whereas in November, 1921, the 
value of 9700 pounds of hogs was required to 
pay this freight. A car-load of cotton, which 
in 1913 could be moved from Tennessee to the 
New England mills for the price of 1287 pounds 
of cotton, required 1808 pounds of cotton to pay 
the freight in 1921. 

The Congressional Joint Commission of Ag- 
ricultural Inquiry is authority for the state- 
ment that on August 1, 1913, freight charges 
from Goodland, Kansas, to Chicago on the 
number of bushels of corn required to purchase 
four standard implements used by farmers was 
$122.16. On August 26, 1920, the freight charge 
on the corn necessary to purchase these four 
implements was $179.30, but on October 15, 
1921, the freight charge on the corn necessary 
to purchase these implements was $1051.41. 

78 


CAUSES OF THE DEPRESSION 


The foregoing are but illustrations which 
could be multiplied indefinitely. They show the 
additional burden imposed upon the farmer just 
at the time when he was least able to bear it. 
The number of bushels or pounds required to 
pay the increased freight charges of course 
varies with the price of the particular com- 
modity. In some of the illustrations given the 
price of the farm product was at its lowest 
point, and the charge might be made that the 
illustrations are not fairly drawn. They do, 
however, show the added expense borne by the 
farmer at the time stated. 

The cost of shipping his own products to 
market is not by any means the total freight- 
bill the farmer must pay. The cost of shipping 
the processed products, such as flour or dressed 
meat, to the consumer must also come largely 
out of the price the farmer receives. In ad- 
dition the farmer must pay freight charge on 
most of the things he buys—implements, lum- 
ber, clothing. Increases in freight charges 
which might seem small in normal times become 
very serious in times of acute agricultural de- 

79 


OUR DEBT AND DUTY TO THE FARMER 


pression. There have been some reductions in 
freight rates on farm products since the high 
point of 1921, but these reductions have not in 
any sense been adequate to meet the farmer’s 
needs. 

Margins taken by other agencies handling 
farm products have increased. These higher 
handling-charges, which were largely due to the 
increased wages paid to labor, were not burden- 
some so long as prices of farm products re- 
mained at or near war levels. But the situa- 
tion became serious when commodity prices 
dropped without a corresponding drop in these 
charges. An increased toll of 10 to 20 cents a 
bushel for handling wheat or corn does not 
seem so large when wheat is selling at $2.50 to 
$3 a bushel and corn at $1.50 to $2. But when 
wheat drops to $1 and corn to 50 cents, an in- 
creased handling-charge of even a few cents is 
keenly felt. 

The widening of the spread between prices 
paid to producers and prices paid by consumers 
is illustrated in figure 8. The retail price of 
a sixteen-ounce loaf of bread in Washington, 

80 


CAUSES OF THE DEPRESSION 


DISTRIBUTION OF THE RETAIL PRICE 
OF A I-POUND LOAF OF BREAD 
IN WASHINGTON, D. C. 


Cradsastssssteaper 
PEA, Fear aia aeatealas 
200320655555 202 705 eer, 
SOPELEEPEREEEPL LES POAPEEAOEE LETT Ee 
POLEPPEPLAALE ELBE SOCCLEAI EDEL ELLE 
SEOLEAPELEEL CLASES SOCOPOCLADTOPEIPEL 


FORE eek tee a eere Peo eezoeercccoeore 


Cee e ee eat aes rece LOCGEPP CTA OL et eae 
SOOLEPEPERPEBREELEE SPPEPPPPLORPEAEBEE 

DOOD E Eee eA ba eas SELaPee TTA ath easte 

FOCg Ear pa seeeeees Cote reese Peortoes 

SFEAALAPEAPEFEEEBE CPEMEFTFEFEPEEPE CE 

J PERT eD aaa eaeteeee Pee reesseereresose 
BOOLFOPAPUERPEDEREE 


s A PFPPEPEFPEEAEDLEE 
Ss RGIN EAA 
MA SOOPEPPEPLATORLALSE 








Lobor, Deli , Store Maintenance, Credit,- i ost 
A ce vO protit or Loss. 37 
: 1913 1923 
(i.12 Cents) (2.00 Cents} 


POPLEPPPPPPFE LEE 
AA OOPPPLEPELELILES 


PEPPEELEFEILELEEL ED? 
POORER EAE E LEE EEE 
pe eAes ds teLese totes Ceeeeseeas 
Peeeaerees Peerereese 
SAPEPOPL A CEALPADL EL 
POPPIAPOEEIP ALES ED 
POLAEAE ALLEL OD ee ae 
ERs ae tasaresgesed 
Dae ee ata e rss geree 


PY alt terrae 








eroeee 


BAKERS’ MARGIN 


Monutacturing, Delivery and Selling, ~---- 
Administration, Plant Maintenance, 


((3.24Cents) 





eee 














SRN 
f a 
MATERIALS OTHER THAN FLOUR ii Mit ana 
Added by baker in making bread ul IH ill ill Ht ili il 
(0.38 Cents). 0.25 Cents) tt HA i if i! H eat 
TRANSPORTATION MARGIN Hatt taltattl 
dione ie Meee De tne HTH Tt 
(eis Cantey .28 Cant) ~ A i 
MILLING MARGIN ON FLOUR___ Mt tit Hit it 
. ._ (0.42 Cents) (0.48 Cents) 





from Elevator to Minneapolis 
(0.11 Cents) (0.15 Cents) 


ELEVATOR MARGIN ON FLOUR IN WHEAT*)/ 


(0.05 Cents) (0.12 Cents) ae 
CLMARER UL 





FREIGHT CHARGES ON FLOUR IN innit 





: 





WHEAT GROWERS’ PORTION 
FOR FLOUR IN WHEAT * someerece 
(117 Cents) (47 Cents) 


*Amount of wheat required to mill the 
standard patent flour for 166zs. of bread. 


SEPTEMBER SEPTEMBER 
ISI3 1923 


Bosedon bread formulas for the years 1913 and 1923. 


FIGURE 8 
81 


OUR DEBT AND DUTY TO THE FARMER 


D. C., advanced from 5.45 cents in September, 
1913, to 9 cents in September, 1923. This ad- 
vance in bread prices did not benefit the farmer. 
The portion received in 1913 by the wheat 
grower for the wheat equivalent of flour used 
in baking the Washington loaf was about one 
fifth of the retail price of bread, whereas in 
1923 it amounted to less than one sixth. While 
the wheat-grower’s portion of the retail price 
of bread increased between these years less 
than one third of a cent, the margins of those 
who handle the wheat after it leaves the farmer 
were increased by a total of 314 cents. 

These margins between producer and con- 
sumer, excessively widened as they were, not 
only reduced the prices received by farmers, 
but increased as well the retail prices paid by 
consumers. Thus the farmers were deprived 
of one of the natural cures for low prices, 
namely, increased consumption. 

The prosperity of the farmer is not meas- 
ured by the prices he gets for what he sells. 
It is measured by his total income and what 
that income will buy. If the prices of things 

82 


CAUSES OF THE DEPRESSION 


he must buy, such as food, clothing, imple- 
ments, fencing, building-materials, binding- 
twine, labor, interest, taxes, and transporta- 
tion remain high, and at the same time prices 
of farm products abruptly decline, then the 
farmer suffers financial loss. 

We have no good measure of the purchasing- 
power of farm products. We can show the ex- 
change value of units of products, as, for ex- 
ample, a bushel of corn or a bushel of wheat, 
but this does not tell the whole story. The 
farmer’s income depends not only upon the 
prices he gets for his products but on the quan- 
tity of products he has to sell. Yet the meth- 
ods now used are helpful in showing the 
changes that have taken place in the farmer’s 
buying-power. 

While prices of farm products dropped to 
bottom levels in 1920 and have since remained 
relatively low, the prices of nearly everything 
the farmer buys have continued relatively high, 
because freight rates and industrial wages, 
which enter not only the cost of manufactur- 
ing but also the cost of transportation, are far 

83 


OUR DEBT AND DUTY TO THE FARMER 


above their level before the war. The accom- 
panying chart (figure 9), which presents the 
relationship between prices at the farm of farm 
products and prices at wholesale of non- 
agricultural products, shows how grievously 
the farmer has suffered in the exchange value 
of his products since 1920. From 1910 to 1919 
the purchasing-power of farm products was in 
the main favorable to the farmer, although the 
relative advantage which he enjoyed during the 
war years was not as great as ordinarily as- 
sumed. The exchange value of 30 farm prod- 
ucts even at its height in 1918 was only 6 per 
cent. above the pre-war level. Beginning with 
1920, however, the trend was reversed. The 
purchasing-power of farm products dropped 
in 1921 to 34 per cent. below the pre-war level 
and has remained for more than three years at 
the lowest level in a generation. 

If in measuring exchange value we use re- 
tail prices, which farmers actually pay for 
commodities and which are materially higher 
than wholesale prices, the disadvantage under 
which farmers have labored becomes still more 

84 


CAUSES OF THE DEPRESSION 


FARM PRODUCTS 
FARM PRICE AND PURCHASING POWER 1913-1924 


AUG. 1909-JULY 1914=100 
MWA Price ose? Purchasing Power 





1914 916 1918 1920 1922 1924 1914 (916 1918 1920 1922 1924 





1914 1916 1918 1920 1922 1924 1914 I916 I918 1920 1922 1924 





914 (916 1918 1920 1922 1924 1914 I916 1918 1920 1922 1924 





4914 1916 {918 1920 1922 1924 1914 1916 1918 1920 1922 1924 


FIGURE 9 
85 


OUR DEBT AND DUTY TO THE FARMER 


apparent. While wholesale prices for non- 
agricultural commodities in 1921 were 61 per 
cent. above the 1913 prices, retail prices of a 
large group of articles which farmers buy were 
almost 68 per cent. above their 1913 level. 

The value of an acre of crop is no doubt a 
better measure of purchasing-power than the 
price per unit. This is true because a farmer 
may have poor yields when prices are high or 
vice versa. In the fall of 1923, for example, 
the price of a pound of cotton was 138 per cent. 
above the pre-war price; the value of the crop 
per acre, however, was 81 per cent. higher, and 
the purchasing-power per acre was only 16 per 
cent. over the pre-war level. While for the 
country as a whole there have been satisfactory 
yields for most crops during the last several 
years, it must not be overlooked that there are 
in various regions many farmers who have suf- 
fered not only from low prices but from poor 
crop yields as well. 

The reduced purchasing-power of farmers 
can be shown perhaps most effectively with a 
few illustrations. A ton of coal, which cost 

86 


CAUSES OF THE DEPRESSION 


the Kansas farmer 9 bushels of wheat in 1913, 
cost him 13 bushels in 1923, and a wagon for 
which he paid before the war 105 bushels cost 
him 177 bushels in 1923. With an acre of corn 
a farmer in 1913 could buy 18 pairs of overalls, 
but in 1923 this acre of crop would buy only 12 
pairs. An acre of rye, which would buy almost 
6 gallons of paint in 1913, would buy less than 
21%% gallons in 1923. With an acre of oats a 
farmer could buy 185 pounds of sugar in 1913, 
but in 1923 only 120 pounds, and with an acre 
of hay he could buy 24 pitchforks in 1913 as 
compared with 17 in 1923. 

It is also well to remember that distance 
from markets has a material bearing on the 
purchasing-power of farmers. In general it is 
true that prices of farm products have declined 
most in regions far from markets. This fact 
has made the depression worse in many re- 
gions. Thus between December, 1913, and De- 
cember, 1921, the farm price of corn in Ohio de- 
clined 35 per cent., whereas in Iowa it dropped 
50 per cent. The prices of horses in New York 
during the same period declined only 6 per 

87 


OUR DEBT AND DUTY TO THE FARMER 


cent., while in North Dakota the drop was 49 
per cent. 

It is worth while to compare wages in the 
organized industries with the wages received 
by the farmer, as shown in the prices he gets 
for the things he grows. The average wage 
received by a coal-miner for mining a ton of 
coal would buy in the State of Iowa 1.1 bushels 
of corn in 1913 and 2.5 bushels in 1921. It 
would buy 4.7 pounds of cotton in Texas in 1913 
and 8.5 pounds in 1921. It would buy 7 pounds 
of hogs in Nebraska in 1913 and 14 pounds in 
1921. The average yearly earnings of railroad 
employees would buy 1492 bushels of corn in 
Towa in 1913 and 4112 bushels in 1921. They 
would buy 1028 bushels of wheat in North Da- 
kota in 1918 and 1466 in 1921. 

It should not be overlooked that before the 
products of the farm reach the consumer’s 
table, a good deal has been added to the price 
which the farmer receives. What these com- 
parisons show is that the wages of the farmer, 
as represented by the prices paid for his crops, 
are lower than they were before the war, meas- 

88 


CAUSES OF THE DEPRESSION 


ured in purchasing-power, while the wages of 
the workmen, especially in the organized indus- 
tries, are considerably higher than they were 
before the war, whether measured in dollars 
and cents or in purchasing-power. 


89 


CHAPTER V 
THE FARMER’S SHARE IN THE NATIONAL INCOME 


ROM all evidence it is clear that farmers 
K as a group have not been receiving an 
adequate return for their labor and capital nor 
a fair share of the national income. This has 
been especially true since the depression be- 
gan in 1920. 

Recent studies of the National Bureau of 
Economic Research and of the Department of 
Agriculture permit us to make broad compari- 
sons of the returns to agriculture before, dur- 
ing, and after the war. The average earnings 
of farmers for labor, risk, and management, as 
determined by these studies, are shown in the 


following table: 
90 


FARMER’S SHARE IN NATIONAL INCOME 


AVERAGE EARNINGS OF FARMERS FOR LABOR, RISK, 
AND MANAGEMENT COMPARED WITH FARM- 
HAND WAGES, 1909-23 


Reward per operator | Reward per | Wages, without 
(including family operator,  -} board, per year 

Year labor) after allowing | exciuding paid to hired 
interest on capital 1 family .abor, | labor 





Calendar Year Dollars Dollars Dollars 
1909 311 255 329 
1910 462 379 330 
1911 392 321 345 
1912 372 305 355 
1913 444 364 364 
1914 459 376 359 
1915 495 406 362 
1916 586 480 394 
1917 903 740 485 
1918 1278 1048 586 
1919 1466 aid 675 
1920 465 alee 779 

Crop Year 

1919-20 932 i 764 675 
1920-21 399 oon 779 
1921-22 292 239 520 
1922-23 454 372 501 
1923-24 520 426 563 





1 Calendar years 1909-20, estimates of the National Bureau 
of Economic Research; crop years 1919-20 to 1923-24, esti- 
mates of the Department of Agriculture. 


91 


OUR DEBT AND DUTY TO THE FARMER 


It will be observed that the average earnings 
of farmers and their families for labor, risk, 
and management, excluding the rental value of 
the homes in which they live, rose from $311 in 
1909 to $1466 in 1919, and thereupon declined 
to $292 in the crop year 1921-22, but since then 
have risen again to $520 in 1923-24. If the re- 
ward for family labor is deducted, it appears 
that the earnings of farm operators during the 
last four years, and even in some years before 
the war, were less than the annual wage paid 
to farm hands. 

If the situation is considered from the stand- 
point of returns on capital the results are 
equally significant. According to the study of 
the National Bureau of Economic Research, the 
rate of return on all capital used in agriculture 
increased from 3.6 per cent. in 1909 to 8.5 per 
cent. in 1917, 10.7 per cent. in 1918, and 11.2 
per cent. in 1919. During the period of the 
war the rates of return were unusually good 
for agriculture, though not as large as ordi- 
narily assumed. 

92 


FARMER’S SHARE IN NATIONAL INCOME 


It is true that these rates of earnings are 
based on the relatively high valuations of farm 
property during the war, and are therefore 
lower than they otherwise would be, but even 
if reckoned on capital valuations adjusted to 
1910-14 values it appears that the average re- 
turn at its maximum in 1919 did not quite reach 
1714 per cent. These earnings are small com- 
pared with the ‘‘cost plus’’ profits obtained by 
other industries during the war. Furthermore, 
in making comparisons between the returns to 
capital invested in agriculture and other in- 
dustries it is important to bear in mind that 
the estimated return to agriculture includes the 
rewards for both capital and the managerial 
services contributed by farmers. On the other 
hand, these returns represent earnings in add1i- 
tion to the rent of homes in which farmers 
live. 

Since 1920 the return on capital invested in 
agriculture and especially on the capital of 
actual farm operators has been ruinously low, 
as the following table shows: 

93 


OUR DEBT AND DUTY TO THE FARMER 


RATES OF RETURN EARNED ON CAPITAL INVESTED 
IN AGRICULTURE 











Rate earned 
on opera- 
tors’ net 


Rent paid on 
value of cash 
and share rent- 


Rate earned | Rate of inter- 
on all capital | est paid on 
Year invested in | mortgage and 
















agriculture other indebt- | ed property capital in- 
edness vestment 

Per Cent Per Cent Per Cent Per Cent 
1919-20 6.2 6.7 5.8 
1920-21 0.6 6.8 — 3.1 
1921-22 1.4 6.8 — 14 
1922-23 3.1 6.8 1.5 
1923-24 3.1 6.8 1.4 


After paying all operating expenses and 
allowing themselves the current farm-hand 
wage, farmers earned nothing on their invest- 
ment during two years of the depression and 
slightly less than 114 per cent. in 1922 and 1923. 
At the same time they paid over 6 per cent. 
on their borrowed capital and on the value of 
lands which they rented. 

The failure of agriculture since 1920 to yield 
a reasonable interest rate on capital and an 
adequate wage to operators is apparent also 
from the fact that only 10 to 17 per cent. of 
the income of the past four years was available 

94 


FARMER’S SHARE IN NATIONAL INCOME | 


for food, clothing, furniture, travel, education, 
recreation, savings, and other items of ex- 
penditure which enter the standard of living, 
whereas nearly 30 per cent. of the total income 
in 1919-20 was available for these purposes. 
The effect of the severe decline in farmers’ in- 
come on their standards of living can be real- 
ized when it is recalled that in the four years 
since 1919-20 wholesale prices of all commodi- 
ties declined a maximum of only 30 per cent., 
retail prices of food 25 per cent., and cost of 
living 15 per cent., whereas the average net 
cash income of farmers declined as much as 80 
per cent. 

The farmer is clearly not receiving his fair 
share of the national income. This is plain 
for the years of the depression. It is not so 
well known that it was true also before the 
war. With an investment of over one fourth 
of the total capital of the Nation and a labor 
force employed equal to almost one third of all 
people gainfully employed, agriculture, accord- 
ing to recent estimates, received in 1909 only 
18 per cent. of the national income. This con- 

95 


OUR DEBT AND DUTY TO THE FARMER 


dition must be corrected. If we are to have a 
prosperous nation we must have a profitable 
and satisfying agriculture. Farmers must 
have a sufficient income to pay off debts 
assumed at war prices to help win the war, and 
to establish and keep the standard of living 
that American ideals demand. To build a 
profitable, stable, and attractive agriculture 
calls for sympathetic help from the Nation as a 
whole, as well as for the individual and col- 
lective efforts of farmers themselves. 

During the period of land exploitation and 
development, increase in the value of the farm 
made a substantial addition to the income from 
annual production. In the future the income 
from enhanced land values will be small, and 
the farmer must depend for his income on aver- 
age annual production. His income from this 
source must therefore be very much greater 
than in the past. 


96 


CHAPTER VI 
NATIONAL AID DURING THE DEPRESSION 


HE catastrophe to agriculture came so 
A swiftly and to many so unexpectedly that 
it is not surprising that for a time there was 
great confusion of tongues and uncertainty as 
to what might properly and effectively be done 
by legislation. 

By many it was thought that the decline in 
agricultural prices was but the prelude to a 
decline in the price of commodities in general. 
This belief found support in the fact that in 
1921 several millions of men employed in the 
industries were out of work and it was assumed 
that this would result in substantial wage re- 
ductions and lower prices. Those who held 
this view believed that there was no need for 
special legislation to help the farmer, that be- 
fore long prices of other commodities would be 

97 


OUR DEBT AND DUTY TO THE FARMER 


adjusted to the lower prices of farm products, 
and that we would then go along comfortably 
on a lower price plane. 

Others were of the opinion that prices of 
‘agricultural products would swing upward 
again. They could not believe that such terrific 
declines within six months could be due to any- 
thing but exceptional and temporary causes. 
This view was held by many farmers and of- 
ficers of farm organizations, some of the latter 
indeed going so far as to advise their members 
not to sell their products but to demand prices 
as high as those which had prevailed but a few 
months before. This was very costly advice to 
those who acted on it. The rise in prices of 
farm products and farm land during the war 
and for a year and a half afterward led many 
farmers as well as many bankers and business 
men to believe that they would never again see 
cheap wheat or cheap corn or cheap hogs or 
cheap cattle or cheap land. This idea was so 
firmly fixed in their minds that it was not dis- 
lodged until the depression had continued for 
some time. 

98 


NATIONAL AID DURING DEPRESSION 


Still others who had limited knowledge of 
agricultural conditions, and who were unable to 
understand the serious nature of the case, re- 
garded the depression as.not materially differ- 
ent from previous depressions. They thought 
the farmer ought to be able to work out of it by 
economy, readjustment of production, reduc- 
tion of costs of operation, hard work, and like 
means. They thought it the inevitable result 
of war conditions and therefore to be endured 
with patience and becoming resignation during 
the period of readjustment. They saw no oc- 
casion for federal action. 

And it may as well be recorded that a not 
inconsiderable group whose interests are 
wholly industrial and commercial were quite 
reconciled to low prices for the products of the 
farm. What they want is cheap food for their 
workmen so that they can keep down wages and 
their own costs of production. They regard the 
farmer as a person especially designated by the 
Lord to produce food in abundance for the rest 
of mankind and to take without complaint 
whatever people are willing to give him. If 

99 


OUR DEBT AND DUTY TO THE FARMER 


they can buy food cheaper from farmers of 
other countries where virgin land is being ex- 
ploited, where labor is cheaper and the stand- 
ards of living lower, they will do it gladly and 
not worry over what may happen to our own 
farmers in trying to meet such competition: 
They think only of themselves and their own 
selfish interests in the present. 

Between March 4, 1921, when Congress ad- 
journed, and April 11, most of the agricultural 
members had visited their districts, talked with 
their people, and learned at first hand that 
something serious was happening and that 
farmers were expecting Congress to do some- 
thing about it. By this time also the reduction 
in the farmer’s income was having a bad effect 
on business in that he was compelled to reduce 
his purchase of machinery, implements, cloth- 
ing, and other things which he was accustomed 
to buy, and representatives in Congress from 
many industrial districts were disposed to 
listen sympathetically to the farm story. Con- 
gress, therefore, appointed a Joint Commission 
of Agricultural Inquiry composed of members 

100 


NATIONAL AID DURING DEPRESSION 


of both Senate and House and representing 
both political parties. This commission made 
an exhaustive inquiry into the state of agri- 
culture, held extended hearings, collected a 
mass of detailed information, and in the winter 
of 1921-22 published a report in four volumes. 
By direction of President Harding a national 
conference on agriculture was called to meet in 
Washington in January, 1922. The delegates to 
this conference were mostly leading farmers 
and officers of farm organizations, but invited 
to meet with them were a number of repre- 
sentatives of the agricultural colleges, several 
economists of note, delegates from state boards 
of agriculture, representatives of the agri- 
cultural press and of industries closely allied 
- with agriculture, bankers, manufacturers of 
farm implements, and others. This conference 
met for a week and through its committees made 
recommendations which were transmitted to 
Congress by President Harding. 

During the three years beginning with the 
special session in April, 1921, agriculture was 
the subject most frequently considered in Con- 

101 


OUR DEBT AND DUTY TO THE FARMER 


gress. The speeches and discussions fill hun- 
dreds of pages of the ‘‘Congressional Record.’’ 
The reports of committee hearings fill hundreds 
of volumes. Never before did agriculture re- 
’ celve so much attention at the hands of either 
the legislative or administrative branches of 
the Government. Out of all this discussion 
there came a number of laws relating to agri- 
culture. These laws were good but were 
rather a treatment of symptoms than of the 
disease. The actual situation was not gen- 
erally recognized and courageously attacked. 
A surplus of agricultural products had been 
created by artificial stimulation, by high prices, 
and by unusually favorable crop seasons, and 
the surplus could not be sold at prices which 
would give the farmer even the cost of produc- 
tion. On the other hand, organized labor, the 
railroads, and many industries had so fortified 
themselves during the war years through 
organization and favorable legislation that they 
could resist price and wage reductions. It 
was not seen that agriculture in this difficulty 
needed help in an unusual way, and that unless 
102 


NATIONAL AID DURING DEPRESSION 


such help were given it would have to go 
through an unexampled period of liquidation, 
in which hundreds of thousands of farmers 
would be ruined. 

Legislation of a relief character enacted by 
Congress consisted of an emergency tariff, the 
enactment of certain emergency credit legis- 
lation in 1921, some small appropriations for 
direct loans to farmers in certain crop-failure 
areas, some extensions of time for making pay- 
ments due from farmers to the Government, and 
an appropriation of $10,000,000 which was used 
to purchase food to be sent to Russia. This 
appropriation probably had some temporary 
effect in raising the price of grains. 

The emergency tariff was meant to check 
large importations of wool, meats, and dairy 
products which had accumulated in South 
America and Australia. Such importations 
were being made notwithstanding low prices 
because the United States was a nearer market 
than Europe and because this country was the 
only one which had ample buying-power. 

The credit legislation sought to relieve the 

103 


OUR DEBT AND DUTY TO THE FARMER 


farmer somewhat from pressure to pay his 
debts. This pressure in large part grew out of 
the deflation policy adopted by the preceding 
administration and of the necessities of the 
- banks in the agricultural regions, which had 
over-extended themselves in loans to farmers 
and land speculators. Insistence on payment 
was forcing crops to market as soon as they 
were harvested, and in the West it was forcing 
rapid liquidation of live stock not ready for 
market, thereby still further depressing prices. 

It is not possible correctly to appraise the 
relief value of the credit advances by govern- 
ment agencies such as the War Finance Corpo- 
ration during 1921 and 1922. They eased some- 
what the acute credit condition in the West, 
and for a time at least prevented many banks 
from closing their doors. This in turn made 
it possible for the banks to deal more leniently 
with their farmer customers and carry obliga- 
tions which otherwise they would have had to 
press. In view of what followed, however, it 
is not so clear that all of these extensions of 
time were a kindness to the farmer and stock- 

104 


NATIONAL AID DURING DEPRESSION 


man. No doubt they enabled some to bridge 
over a period of stress and finally get their 
affairs in such shape that they could work out. 
In probably more eases it is reasonably certain 
that through extensions of credit farmers were 
encouraged to hold on for a year or two only 
to find that they were engaged in a hopeless and » 
losing struggle in which they were finally over- 
come. As we look back, it seems clear that 
thousands, and probably hundreds of thousands 
of farmers and stockmen would have been bet- 
ter off had they turned over their property to 
their creditors in 1921, or taken advantage of 
the bankruptcy laws, and made a fresh start. 
‘The borrowing of money to bridge over a time 
of temporary depression is one thing, but the 
borrowing of money to continue an unprofitable 
business is simply a form of voluntary serv- 
itude, in which the debtor wears himself out in 
paying interest with no hope of paying any- 
thing on the principal. 

The emergency credit provided by the Gov- 
ernment was helpful, however, in holding down 
the high interest rates charged by banks and 

105 


OUR DEBT AND DUTY TO THE FARMER 


in enabling many of the larger commodity- 
marketing associations to get credit in larger 
volume and on more favorable terms than other- 
wise would have been possible. When it became 
known that these cooperatives could borrow 
directly from the government agencies, private 
agencies became more liberal and loaned more 
freely and at lower rates. The emergency 
credit was helpful in still another way in that 
it inspired new confidence among many bankers 
who were hard pressed and under severe nerv- 
ous strain. It is true that many of these 
banks used the money secured from the emer- 
gency agency to liquidate obligations to the 
Federal Reserve System, rather than to give 
additional credit to farmers. Many country 
bankers were so thoroughly frightened at their 
own situation that they bent most of their ef- 
forts to save themselves. The government 
emergency credit might have been still more 
helpful had the bankers in the agricultural 
regions used it up to the limit of their oppor- 
tunities. However, putting several hundred | 
million dollars of fresh money into the dis- 
106 


NATIONAL AID DURING DEPRESSION 


tressed country, while it did not correct the 
cause or cure the disease, did enable many 
farmers and many bankers to temper its sever- 
ity, and for a time at least to escape the fate 
which overtook so many of their neighbors. 

In addition to what has been referred to as 
relief legislation, Congress enacted a number of 
laws, none of which aimed to correct conditions 
which were responsible for a continuance of the 
depression, but all of them designed to help 
get agriculture on a better business basis. In- 
cluded in this beneficial legislation were: an act 
legalizing cooperative associations, the Packers 
and Stockyards Act, the Future Trading Act, 
the Agricultural Credits Act of 1923, the amend- 
ment to the Federal Reserve Act providing for 
farmer representation on the Federal Reserve 
Board and liberalizing the discounting of farm 
paper, and several other acts of lesser im- 
portance. 

The cooperative law makes it possible for 
farm producers to act collectively through co- 
operative associations in preparing, process- 
ing, and marketing their products. It requires 

107 


OUR DEBT AND DUTY TO THE FARMER 


that the association shall be operated for the 
mutual benefit of its members and that each 
member shall have but one vote. It forbids 
such associations to monopolize or restrain 
- trade, or unduly enhance the price of any agri- 
cultural products handled by them, and charges 
the Secretary of Agriculture with the responsi- 
bility of enforcing this prohibition. This act 
removes any legal obstacles which may have 
stood in the way of the free organization and 
proper functioning of farmers’ cooperative as- 
sociations, and puts an end to such annoyances 
and petty persecutions as were practised at 
times during the war years by overzealous small 
officials. The purpose is to give full freedom 
and encouragement to farmers in organizing 
cooperative associations for the marketing of 
their products. 

Although the Federal Warehouse Act first 
became a law in August, 1916, it did not begin to 
function effectively until 1921. It grew out of 
the difficulties of the cotton farmer, but has be- 
come a law of far greater importance to 
farmers generally than seems to be understood 

108 


NATIONAL AID DURING DEPRESSION 


or appreciated. The primary purposes of this 
law are to encourage the proper storage of 
agricultural products, to eliminate loose, un- 
sound, and illegal practices in warehousing, 
and to develop a form of warehouse receipt ac- 
ceptable to bankers generally as security for 
loans. Under it the Secretary of Agriculture 
is given authority to license approved public 
warehousemen who have proper facilities for 
storage, who are of good character, who file an 
acceptable bond, and who are willing to subject 
themselves to strict federal supervision. The 
law provides for licensed weighers, graders, 
inspectors, and samplers, and for the issuance 
of warehouse receipts containing specific in- 
formation as to weight, grade, condition, and 
identification marks, so that the holder of the 
receipt can tell from current market reports 
what the product is worth, whether the holder 
be the owner or the banker who loans on the 
receipt. Constant inspection by government 
agents gives assurance that commodities are in 
the warehouse for all outstanding receipts. 
Warehouse receipts may not be issued until the 
109 


OUR DEBT AND DUTY TO THE FARMER 


product is actually in the warehouse, and the 
product may not be removed except upon the 
surrender and cancellation of the receipt. 
Both negotiable and non-negotiable receipts 
“may be issued. This law has steadily in- 
creased in usefulness and popularity among 
farmers, farmers’ cooperative associations, 
warehousemen, and bankers. It makes it possi- 
ble for farmers who desire to hold staple com- 
modities for a better price to borrow money at 
low rates on commodities stored in federally 
licensed warehouses. It greatly facilitates the 
obtaining of loans both from private bankers 
and from government credit agencies. 

The combined capacity of warehouses li- 
censed since 1920 to store different crops is 
shown in the following table: 





Date | COTTON GRAIN WOOL TOBACCO PEANUTS 
(bales) | (bushels) (pounds) (pounds) (tons) 

Apr. 1, 1920 40,050 136,000 None None None 

Apr. 1,1921 429,975 2,108,400 | 24,375,000 None None 


May 1,1922 | 1,209,695 | 14,441,080 | 27,500,000 |' 68,395,000 None 
May1,1923 | 1,903,979 | 15,699,547 | 32,351,250 | 240,255,000 None 
May 1,1924 | 2,131,846 | 35,031,232 | 25,801,500 | 399,302,000 | 3,385 


110 


NATIONAL AID DURING DEPRESSION 


The Federal Warehouse Act has broadened 
the sources of credit available to the farmer. 
It enables the farmer to borrow more freely at 
low interest rates, and thus makes it possible 
for him, either individually or through his 
cooperative association, to merchandise staple 
commodities in an orderly way rather than 
dump them on the market at harvest time or 
when pressed by local creditors. 

The Agricultural Credits Act of 1923 was not 
emergency but permanent legislation designed 
to create the machinery through which in time 
the farmer will be provided with a form of 
credit very necessary to the orderly conduct of 
his business. 

The need for a better system of farm credit, 
both mortgage and personal, has been felt for 
many decades. In 1916 Congress enacted the 
law which created the Federal Farm Loan Sys- 
tem. Federal land banks were set up in twelve 
districts throughout the country. These banks 
were provided originally with a capital of 
$750,000 each, most of which was supplied by 

111 


OUR DEBT AND DUTY TO THE FARMER 


the Government. They were authorized to 
make loans on farm mortgage security for 
periods ranging from five to forty years. The 
highest rate of interest which federal land 
‘banks may charge is 6 per cent. The rate, of 
course, may be lower since it is governed by the 
interest rate that must be paid on funds ob- 
tained for lending purposes. In the fall of 
1924 federal farm loans were made at an 
interest rate of 514 per cent. Payments are 
made in semiannual instalments, which cover 
the interest and a part of the principal until 
the loan is paid. After they have run five 
years, borrowers may repay their loans in full 
or in part on any interest-paying date. The 
mortgages taken on farms serve as security for 
tax-exempt bonds which are issued by the 
federal and joint-stock land banks and sold to 
investors, the money received for the bonds 
being loaned on other mortgages. The law in- 
cludes a provision by which the borrowers take 
a certain amount of stock in the land banks, and 
in time the government capital will be paid off 
in this way, and the banks will then become 
112 


NATIONAL AID DURING DEPRESSION 


great cooperative institutions. The advantage 
to the farmer of this farm loan system is that 
his morigage loans may be placed for a long 
period of time, which avoids the necessity of re- 
newing them every three to five years and of 
paying new commissions and incidental charges. 
The interest rate on federal land bank loans 
also is substantially lower than that charged by 
other lending institutions in many regions. The 
first loans under this system were made in 1917. 
By the latter part of 1924 the federal and joint- 
stock land banks had loaned nearly one and a 
half billion dollars. The Federal Farm Loan 
System is growing steadily and has been very 
helpful, especially to farmers in the newer and 
less favorable agricultural regions where 
interest rates have been especially high. 

In addition to mortgage credit, which is most 
commonly used for the purchase of land, most 
farmers need to borrow on personal credit to 
secure sufficient working capital and to make 
needed improvements. During the _ crop- 
growing season money is needed to pay running’ 
expenses covering a period of three to six 

113 


OUR DEBT AND DUTY TO THE FARMER 


months. The farmer who is breeding live 
stock may need credit for a year or two, or until 
his young animals are old enough to sell. The 
live-stock feeder who buys animals to be grown 
_ or fattened on his forage and grain crops needs 
credit for periods of three months to a year, 
depending on the nature of his operations. 
The farm owner who has already mortgaged 
his farm for all it should carry often finds it to 
his advantage to add a barn or other outbuild- 
ings, to build a silo, to drain a field, to improve 
his fencing, or to buy some better machinery. 
It is seldom possible to pay for such improve- 
ments from the earnings of a single crop year, 
and credit for such purposes is needed for a 
period of one to three years. 

The farmer has been obliged to depend for 
this personal intermediate credit on the agencies 
which have been developed to meet the credit 
needs of industry and commerce and not the 
needs of agriculture. His credit has been ob- 
tained from the local merchants who carry him 
for food and clothing until the crops are har- 
vested, from the implement and lumber dealers, 

114 


NATIONAL AID DURING DEPRESSION 


from the live-stock commission men, packers, 
or banks who advance money on live stock to be 
fed, and from the local bankers who loan for 
periods of ninety days to six months and oc- 
casionally for longer periods in some of the 
older and more prosperous agricultural regions. 
Usually the merchants and local dealers who 
may extend credit to the farmer must also de- 
pend on the bankers to carry them for this 
credit. When financial conditions are fairly 
normal and money easy the farmer entitled to 
credit usually has been able to get what he 
needed. While his notes at the bank would be 
given for short periods, it was mutually under- 
stood that they would be renewed if necessary. 
But in every time of tight money or financial 
stress the farmer has found himself in a most 
uncomfortable situation. At such time he is 
asked to pay accounts promptly when due, and 
often compelled to sell crops or live stock at a 
sacrifice. The fact that the stringency may re- 
sult from conditions wholly remote from agri- 
culture does not lessen the danger. Pressure 
from city banks on their country bank corre- 
115 


OUR DEBT AND DUTY TO THE FARMER 


spondents may force the latter to press the 
farmer, and in turn force the farmer to dump 
his crops or live stock on the market and de- 
press prices not alone to his own injury but to 
the injury of every other farmer, whether a 
borrower or not. Country bankers as a rule 
understand farm conditions and endeavor to 
make loans with reference to the needs of their 
farmer customers, but as a part of the general 
banking system they find themselves at times 
compelled to follow policies which they know 
will injure their farmer borrowers. ‘The neces- 
sity of relying on the merchant for a consider- 
able amount of credit puts the farmer at a dis- 
advantage in buying at the cheapest price, just 
as credit advanced through the live-stock com- 
mission man or packer may at times make it 
impossible for him to buy and sell his live stock 
at its full value. 

The Agricultural Credits Act of 1923 was 
designed to provide farmers with a form of 
intermediate personal credit adapted to farm 
needs. It sets up twelve intermediate credit 
banks as.a part of the twelve federal land banks, 

116 


NATIONAL AID DURING DEPRESSION 


each provided with an authorized capital of 
$5,000,000 to be drawn from the Federal Treas- 
ury as needed. These intermediate credit 
banks may discount farmers’ notes offered 
them by banks, agricultural credit corporations, 
or other financial institutions, and they may 
loan direct to farmers’ codperative marketing 
associations. Obviously it would not be practi- 
cable for intermediate credit banks to loan di- 
rect to individual farmers. 

There are three ways by which farmers may 
obtain the benefit of the new intermediate 
credit system; first, through their local banks, 
which will be able to make loans to their farmer 
customers for periods up to three years, and re- 
discount these notes with the intermediate 
credit bank, thus making it unnecessary for the 
funds of the local bank to be tied up with 
long-time paper; second, by organizing local 
agricultural credit associations, which may 
borrow or rediscount from the intermediate 
credit bank; and, third, through their codper- 
ative marketing associations, which also may 
deal direct with the intermediate credit bank. 

117 


OUR DEBT AND DUTY TO THE FARMER 


Based upon the notes thus taken from bankers 
and credit associations, debentures are issued 
after the manner of those based on land 
mortgages, and these are sold to investors and 
the money received loaned again. The law 
permits the twelve banks to loan about 
$660,000,000. Farmers are protected against 
exorbitant interest rates by a provision in the 
law which requires that the interest rate 
charged the farmer, without the approval of the 
Farm Loan Board, shall not be more than 114 
per cent. greater than the rate at which the note 
is discounted by the intermediate credit bank, 
and the discount rate shall not be more than 
1 per cent. greater than the interest rate car- 
ried by the last debentures sold. 

The new credits act has been in force since 
March 4, 1923. Since it is a continuing act 
which provides for the creation of a great 
credit system designed to serve agriculture, its 
administrators have been moving with a great 
deal of caution, trying to build a thoroughly 
sound foundation which can be depended on 
to carry the permanent superstructure. This 

118 


NATIONAL AID DURING DEPRESSION 


requires time and hard work. Farmers, bank- 
ers, and investors must be instructed as to 
how they can avail themselves of its provi- 
sions. No doubt after a period of actual ex- 
perience it may be found necessary to amend 
the law here and there, but in its present form 
it seems to be working fairly well. It will work 
far better as farmers learn how to avail them- 
selves of it. 

The intermediate credit system has opened 
up new channels between agricultural districts 
in need of capital and centers of loanable 
funds. Through the sale of debentures, which 
are tax-exempt and issued under government 
supervision, agriculture is in a better position 
than ever before to compete for working capital 
on more nearly equal terms with industry and 
commerce, and it should no longer be necessary 
for the farmer to rely on short-term bank loans 
for the longer-time credit he needs. It is also 
apparent that the new credit system will be of 
much assistance to farmers’ codperative asso- 
ciations. During the first eighteen months of 
its operation, the growth of the system has been 

119 


OUR DEBT AND DUTY TO THE FARMER 


rapid. The loans of the twelve banks, October 
11, 1924, totaled over $55,000,000. Of this 
amount rediscounts amounted to $20,000,000 
-and direct loans to $35,000,000. Agricultural 
credit corporations and live-stock companies, 
whose combined rediscounts stood at better 
than $19,000,000, have made the greatest use of 
the rediscount facilities provided by the system. 
Of the cooperative marketing associations, the 
cotton, tobacco, and raisin associations have 
been most active in securing direct loans from 
the banks. The loans of these three groups 
alone amounted to well over $30,000,000 on 
October 11, 1924. 

The enactment of the Packers and Stock- 
yards Act in August, 1921, came after a period 
of agitation and complaint which had continued 
for more than thirty years. This act extends 
government supervision over the interstate 
meat packers, the public stockyards, the live- 
stock commission merchants and other market 
agencies and dealers operating in such yards. 
It gives to the Secretary of Agriculture very 
broad powers, even to the extent of authorizing 

120 


NATIONAL AID DURING DEPRESSION 


him to determine fair rates for stockyards and 
market agency services. It empowers him to 
examine the books of the packers and other 
agencies brought under the act, and to eradi- 
cate unfair practices of every kind in interstate 
commerce. This act has made it possible to 
put an end to an extraordinary number of im- 
proper practices in the marketing of live stock. 
Already it has effected large savings in the cost 
of marketing live stock. 

Under the Future Trading Act, which was ap- 
proved by the President in 1922, the Govern- 
ment for the first time has an opportunity to ex- 
ercise some supervision over and to study the 
operations of the boards of trade on which trad- 
ing in grain for future delivery is conducted. 
This also came after a period of prolonged agi- 
tation. By some these future trading ex- 
changes have been regarded as beneficent in- 
stitutions wholly good and absolutely necessary 
to the handling of the grain of the country. By 
others they have been regarded as purely gam- 
bling institutions serving no good purpose 
whatsoever but offering only an opportunity 

121 


OUR DEBT AND DUTY TO THE FARMER 


for shrewd traders to fleece farmers. In gen- 
eral, however, they have been accepted as 
necessary to the orderly market'ng of grain, 
and with good and bad to be said for them. 
These conflicting opinions were arrived at with- 
out adequate knowledge. No one has had the 
accurate information necessary to enable him 
to form a thoroughly trustworthy opinion of 
the merits and demerits of such exchanges. 
Under the new law it is possible for the first 
time to make a careful study of just what takes 
place on these exchanges, to determine the vol- 
ume of business done, to show the relation of 
the volume of business to the physical volume 
of crops marketed, and to form some idea of 
the effect of future trading on prices. This 
law also is under the administration of the Sec- 
retary of Agriculture, who is given authority to 
prevent unfair manipulation of prices, to sup- 
press unfounded rumors likely to influence 
prices, and in general to enable him to make an 
exhaustive study of this system of registering 
prices. It seems clear that already the law 
has had a wholesome effect. In time the very 
122 


NATIONAL AID DURING DEPRESSION 


systematic studies now being made should en- 
able us ‘> form a reliable opinion as to the 
value and proper function of these grain ex- 
changes and require such modification in their 
operation as may be necessary. 


123 


CHAPTER VII 
FOREIGN MARKETS FOR OUR FARM PRODUCTS 


HE price which the American farmer 
receives for his products is determined 
largely by the supply and demand for them, not 
alone in this country, but in the world. Our 
production of farm products since the Civil War 
has been greater than our needs, and we have 
depended upon foreign markets to absorb the 
surplus. For better than a decade before the 
late war, however, the exports of our great sta- 
ples had been declining. Though for some 
products our foreign markets in the period were 
expanding, yet in general the home market took 
an increasing proportion of the products of our 
farms. With the outbreak of the World War 
the downward trend of exports was reversed, 
and the volume of our agricultural exports ad- 
vanced to heights that broke all previous 
records. 
It has been so often said that the decline in 
prices beginning in 1920 was due to the inability 
124 


a 


FOREIGN MARKETS FOR FARM PRODUCTS 


of Europe to buy food-stuffs as usual that many 
people still hold that view. It is supposed that 
the price slump was due not so much to over- 
production as to underconsumption, and that 
if the United States would help restore Europe 
as rapidly as possible our ‘‘disappearing’’ 
foreign markets would reappear and the diffi- 
culties of our farmers would be removed. Asa 
matter of fact, our important agricultural ex- 
ports did not decline immediately after the war 
but increased for a time. It is true that the 
better access Europe had after the war to food- 
stuffs in other food-exporting countries weak- 
ened our selling position in Europe. Our 
large oversupply of farm products tended to 
have the same effect. Our agricultural export 
trade would have been more profitable had 
Europe been financially stronger, and had the 
world supply and demand position been less un- 
favorable for the producer. But the volume of 
that trade was so great as to leave not the 
slightest ground for the idea that the farm de- 
pression was due to underconsumption abroad. 
This is proved by the following table, showing 
125 


OUR DEBT AND DUTY TO THE FARMER 


that our exports in the years immediately after 
the war continued high and in the case of some 
products greatly increased: 


“AVERAGE YEARLY NET EXPORTS OF WHEAT, CORN, 
RYE, AND BARLEY, 1910-24 


WHEAT CORN RYE BARLEY 
Year ending including including including including 
June 30 flour cornmeal flour flour 





Average 1000 bushels | 1000 bushels | 1000 bushels | 1000 bushels 


1910-14 104,967 41,409 888 7,896 
1915-19 239,827 45,882 19,127 23,470 
1920 219,865 16,729 41,531 26,571 
1921 366,077 70,906 47,337 20,457 
1922 279,407 179,490 29,944 22,400 
1923 221,923 96,596 51,663 18,193 
1924 156,430 23,135 19,902 11,209 


AVERAGE YEARLY NET EXPORTS OF OATS, COTTON, 
TOBACCO, AND PORK AND PRODUCTS, 1910-24 


OATS COTTON TOBACCO PORK 
Year ending including AND 
June 30 oat-meal PRODUCTS 


Average 1000 bushels 1000 bales 1000 pounds | 1000 pounds 


1910-14 9,655 8,840 392,183 913,025 
1915-19 105,754 6,264 429,339 1,693,529 
1920 43,436 7,087 648,038 1,762,611 
1921 9,391 5,623 506,526 1,522,162 
1922 21,237 6,718 463,389 1,516,320 
1923 25,413 5,253 454,364 | 1,794,538 


1924 8,796 5,899 597,630 1,934,223 





126 


FOREIGN MARKETS FOR FARM PRODUCTS 


It will be observed that in the case of wheat, 
corn, and rye, our principal cereals, the exports 
in 1921, 1922, and 1923, the years of low prices, 
averaged not only very much greater than in 
the pre-war years but were even greater than 
during the war years. This is true also of pork 
and pork products, which make up our largest 
meat exports, and likewise of tobacco. Cotton 
exports have been larger than during the war, 
but less than in the pre-war years, owing to our 
decreased yields. 

These figures dispose of the myth that the 
agricultural depression was due to loss of ex- 
port markets. Europe continued to buy our 
agricultural products in large quantities, be- 
cause she needed them. She bought the more 
freely because we were selling at bargain 
prices. Our production had been so expanded, 
however, that we had more food-stuffs to sell 
than Europe could absorb at prices profitable 
to our farmers. 

Since EKurope resumed trade with Argentina, 
Australia, and other distant sources of food- 
supply, and since agriculture in Europe began 

127 


OUR DEBT AND DUTY TO THE FARMER 


to revive, our exports have declined. The food- 
importing nations of Europe are doing just 
what the individual does when in financial 
straits. They are producing everything possi- 
ble at home, buying as little as possible, and 
buying in the cheapest market. American 
farmers in general have had small profit from 
food-stuffs sold to Europe during the past five 
years. Nevertheless, Hurope has taken a large 
amount of our surplus, and our farmers have 
received better prices than they would have 
received had Europe been out of the market. 

American agriculture should not base its hope 
of revival on the prospect of an increased 
Kuropean demand for its products. There is 
little reason to expect “ny marked increased 
demand. On the contrary, barring unusual 
happenings, such as another war, we must be 
prepared for a decrease in exports of many 
staple products, both because European agri- 
culture is coming back very rapidly and be- 
cause of increased competition from other 
surplus food-producing nations which have 
cheaper land and cheaper labor. 

128 


FOREIGN MARKETS FOR FARM PRODUCTS 


Professor E. G. Nourse discusses the possi- 
bilities of our agricultural exports in his recent 
book, ‘‘American Agriculture and the Euro- 
pean Market.’’ He shows that American agri- 
culture must readjust itself to meet the new 
economic situation and the changes which are 
taking place in the agriculture of Hurope and 
other parts of the world. The policy of Great 
Britain, France, Germany, Italy, and Austria 
is to build up their own agriculture and become 
as nearly independent of outside supplies as 
possible. Consumption in these countries has 
been reduced because of decreased earning- 
power of workmen in the industries, and 
naturally these countries will buy where they 
can buy cheapest and where they can establish 
the best trade relationships and get the best 
exchange rate for their money. There has also 
been a pronounced tendency, Professor Nourse 
observes, for the nations of Europe to enter 
into closer relationships with their dominions 
and dependencies, and with their neighbors, 
and to buy from the countries that will take 
their manufactured goods. 

129 


OUR DEBT AND DUTY TO THE FARMER 


Our two best foreign customers have been 
the United Kingdom and Germany. Study of 
the conditions influencing sales to England does 
not point to an expanding British market. It 
seems reasonable to expect that in the future 
the United Kingdom will continue to import 
from the United States: cotton in decreased 
volume; tobacco in constant or perhaps increas- 
ing volume; pork products as long as the price 
remains low, and in reduced quantities at 
higher prices; wheat and flour in small quan- 
tities, varying with the degree of competition 
from Canada and Argentina; feed-stuffs in 
considerable quantities only when crops are 
short in competing countries; fresh fruits in 
fairly constant but relatively small quantities; 
dried fruits in fair volume, depending upon the 
price and the future growth of competition; 
and glucose and perhaps other specialized grain 
products in the same volume as in the past with 
little competition. 

Better business conditions in the United 
Kingdom will hardly increase the British de- 
mand for American farm products at the ex- 

130 


FOREIGN MARKETS FOR FARM PRODUCTS 


pense of similar products from other countries. 
Indeed, full employment of her workmen and 
better wages may reduce her purchases of pork 
products from us and enlarge her purchases of 
more expensive meats and fats from other coun- 
tries, though improvement and standardization 
in the quality of our products may strengthen 
our position in the British market. The possi- 
bilities in this direction are indicated by the 
fact that our cotton usually sells for less than 
Egyptian cotton, our wheat for less than 
Canadian wheat, our bacon for less than Danish 
and Irish bacon, our corn for less than Argen- 
tine corn, and our dairy products for less than 
similar products from Denmark, Switzerland, 
and Holland. In the past our chief advantage 
over our competitors has been our volume of 
production and low prices, an advantage which 
it will be hard for us to keep. 

Study of German conditions indicates that 
we may look for a market in Germany during 
the next few years for perhaps 800,000 to 
900,000 bales of cotton, and for a good market 
for pork products and fats as long as prices 

131 


OUR DEBT AND DUTY TO THE FARMER 


remain low. Germany has always been a good 
buyer of our lard, and probably will continue 
to buy as she did before the war. German 
purchases of grain from us very likely will 
depend upon what Russia has to sell. Our to- 
bacco exports to Germany will doubtless con- 
tinue. If the economic revival of Germany 
‘builds up her industry more than it builds up 
her agriculture in the next few years, the 
German market for farm products may in- 
crease. It is hardly likely, however, that our 
exports to Germany will reach their pre-war 
volume. 

In the meantime our competition is growing 
stronger. Wheat from Canada, grains and 
meats from the Argentine and from Australia, 
and dairy products from New Zealand have 
been moving to Europe in increasing volume. 
With their cheap and fertile lands, lower pro- 
duction costs and cheaper transportation by 
water, these surplus-producing countries are 
keen competitors with us for Huropean markets. 
This is apparent from the expansion in their 

182 


FOREIGN MARKETS FOR FARM PRODUCTS 


exports of wheat. Whereas before the war 
Canada’s annual wheat exports amounted to 
94,000,000 bushels, in the last five years they 
have averaged 213,000,000 bushels. At the 
same time the average wheat exports of Argen- 
tina have risen from 95,000,000 to 136,000,000 
bushels, and those of Australia from 53,000,000 
to 88,000,000 bushels. Perhaps fifteen years 
from now we shall have less concern about 
competition for our staple products in the 
markets of the world. By that time our popu- 
lation should have grown large enough to con- 
sume most of what we produce. Temporary 
increases in the foreign demand for our farm 
products, such as we are now enjoying in the 
case of wheat, may take place from time to 
time as a result of unfavorable crop conditions, 
but it seems clear that we cannot look for a 
permanent increase. In short, we cannot trust 
to the foreign market to wipe out the present 
distorted relation between the prices of farm 
products and the prices of other goods. There 
seems no sound basis for the hope that the re- 
138 


OUR DEBT AND DUTY TO THE FARMER 


covery of Europe will enlarge the markets for 
our surplus food-stuffs, and thus solve the 
difficulties of the American farmer. Indeed, 
some students believe that the recovery of 
Europe will impair our market there. 


CHAPTER VIII 


CROP ADJUSTMENTS AND ECONOMY IN 
FARM EXPENDITURES 


HE prospects of an expanding outlet for 
T our farm products abroad seems remote. 
The domestic demand for staple farm products 
has been at its peak for two years. Our 
industries have prospered, and workmen are 
recelving very high wages. The per capita 
consumption of wheat and meat has increased 
until it is now at almost the pre-war level. 
Any material expansion of the domestic de- 
mand, therefore, must depend largely upon the 
further growth of population. 

Under these conditions the suggestion has 
been made that farmers should reduce the sup- 
ply of their products, shift their production to 
crops which yield the best returns, reduce their 
costs of operation, and economize to the utmost. 

135 


OUR DEBT AND DUTY TO THE FARMER 


Business men who do not understand the farm 
problem and who are opposed to relief meas- 
ures for farmers often urge that the farmer’s 
difficulties are largely due to his own business 
inefficiency. They say that when the business 
man meets a period of depression or other un- 
favorable conditions he cuts down his costs, 
increases his efficiency, and by thus trimming 
his sails weathers the storm. Why should n’t 
the farmer likewise solve his problem, they ask, 
by reorganizing his business. 

As a matter of fact, farmers have made far- 
reaching adjustments in all of these directions. 
They clearly saw the need of adjusting their 
operations to the new conditions as rapidly as 
possible. They set about this with character- 
istic courage and optimism. They bought 
only what they could not get along without. 
They wore their old clothes, got along with 
old equipment, employed only such labor as 
was indispensable, lived as far as possible on 
the products of the farm, and cut to the bone 
every expense within their control. They were 
not able to reduce, however, such swollen ex- 

136 


CROP ADJUSTMENTS 


pense items as taxes, interest, freight rates, 
and handling costs, all of which continue far 
above pre-war levels. When there was work 
to be had in towns or industrial centers or with 
construction gangs, it was sought by such mem- 
bers of the family as could be spared from the 
farm, and hundreds of thousands of young 
farmers took such work permanently. In 
sparsely settled country large numbers of 
farmers obtained work after harvest, leaving 
the farms and live stock to be cared for by their 
wives and children. No group could have en- 
forced upon itself more rigid economy or 
shown greater resourcefulness, courage, and 
determination in coping with a trying situation 
than have the farmers since the depression 
came upon them. 

Some reduction has been made in the area 
devoted to crops in various regions. Many 
farms have been abandoned, and many farmers 
have permitted lands previously used for crops 
to revert to pasture. But the most outstanding 
progress has been made in shifting away from 
crops for which prices have been least satis- 

137 


OUR DEBT AND DUTY TO THE FARMER 


factory and in reéstablishing balanced sys- 
tems of farming. The production of food 
staples for which there has been inadequate 
demand has been gradually reduced. Since 
1919 the wheat area has declined 22,000,000 
acres, or over 29 per cent., and the rye acreage 
has been reduced by a third. On the other 
hand, farmers have grown more corn, oats, 
barley, and other feed crops and have placed 
greater emphasis on the production of live 
stock. Crops which have enjoyed the effective 
protection of the tariff or which otherwise have 
held a favored position have not been over- 
looked. In the last five years the flax area has 
more than doubled and the acreage of cotton 
has been expanded by 7,000,000 acres, or over 
20 per cent. Good prices for wool likewise 
have been an incentive to sheep growers to 
enlarge their flocks. 

While farmers have not been able to shrink 
their total volume of production greatly and 
cannot do so to a very great extent except as 
unfavorable climatic conditions aid them or as 
they abandon their farms, they have made sub- 

138 


CROP ADJUSTMENTS 


stantial adjustments in their crop acreages and 
farm methods. In some regions the progress 
toward diversification and a better balanced 
agriculture has been astonishing. The number 
of beef and dairy cattle, hogs, and poultry has 
steadily increased. Between 1920 and 1923 the 
production of creamery butter in North Dakota, 
South Dakota, and Montana practically 
doubled. Adjustments of this kind have been 
helpful in reducing costs and increasing farm 
incomes. More food for the farm table has 
been grown and less bought. Out-of-pocket 
costs have been reduced, and high freight rates 
have been partly evaded by production for 
local consumption. Progress made in this di- 
rection has been largely due to a long campaign 
of education conducted by the Department of 
Agriculture and the state colleges of agricul- 
ture, cooperating with other agencies. 
Farmers have been driven by necessity to 
restrict their expenditures. Cash outlays for 
farm labor, equipment, and supplies, as well 
as for the conveniences of life, have been 
greatly reduced. Family labor has been 
139 


OUR DEBT AND DUTY TO THE FARMER 


heavily burdened in an effort to reduce costs 
and increase earnings. The amount of family 
labor expended on five Minnesota farms for 
which we have detailed records increased 12 
per cent. between 1920 and 1923. At the same 
time the amount of hired help employed on 
these farms was reduced by one half. From 
~ another study we gather that the operators of 
twenty South Dakota farms averaged 34714 
days of labor including Sundays in 1922 and 
30414 days in 1923. Farmers have not loafed 
on the job. 

But reduced production, diversification, and 
bed-rock economy have their limitations as a 
remedy for the farmer’s difficulties. Many 
who do not understand farm conditions im- 
patiently inquired why farmers did not at once 
reduce production, inasmuch as low prices 
seemed to be due to overproduction. But pro- 
duction in agriculture cannot be regulated as in 
industry. There are more than six million 
farms in this country, producing a great variety 
of crops. Because of varied conditions of soil 

140 


CROP ADJUSTMENTS 


and climate, location and character of farm 
improvements, some farms are best equipped 
to produce special crops, while others produce 
many different crops. Scattered farmers, even 
those who specialize in one or two crops, can- 
not meet to inform themselves as to conditions 
of supply and demand, and then agree on a 
production program. Nor could such an agree- 
ment be enforced if it were made. Even the 
individual farmer cannot regulate his produc- 
tion, for it depends not alone on the acreage 
planted and on its cultivation, but on the 
weather and on insect pests and plant diseases 
which may or may not yield to control measures. 
For example, the average yield of wheat per 
acre for the entire country in 1915 was 17 
bushels, while for 1916 it was but 12.2 bushels. 
In North Dakota the average yield in 1915 was 
18.2 bushels per acre and the following year 
but 5.5 bushels. In Montana it was 26.5 
bushels in 1915 and 10.4 in 1917. These vari- 
ations in yield are independent of the acreage 
planted or the industry of the farmer. They 
141 


OUR DEBT AND DUTY TO THE FARMER 


illustrate some of the difficulties in controlling 
agricultural production no matter how well 
farmers may be organized. 

Kighty per cent. of the farmers’ capital in- 
vestment consists of real estate, an inelastic 
form of capital hard to dispose of in times of 
_depression. The average period of turnover of 
farm capital varies from five to six years. 
Continued high prices and normal yields stimu- 
late the production of crops like wheat and 
bring into cultivation new land which at low 
prices could not be profitably farmed. On the 
other hand, a prolonged period of low prices 
gradually drives this marginal land out of culti- 
vation. The tendency of the farmer, however, 
is to hold on as long as he can, hoping against 
hope, and enduring hardship and privation 
rather than give up. In times of depression 
the individual farmer cannot reduce production, 
but on the other hand must produce the largest 
possible crops at the lowest cost with his own 
labor. He must do this or quit, for the income 
out of which he pays expenses, taxes, and in- 
stalments on his land comes from production. 

142 


CROP ADJUSTMENTS 


Thus the necessities of the farmer make 
matters worse. The root of his trouble is an 
oversupplied market. Yet he has to continue 
producing for this market if he is not to lose his 
farm and his home. Should nature second his 
efforts with good yields, the supply position 
becomes still more overbalanced. A very 
natural reluctance to abandon investments 
representing the savings of a lifetime, fear of 
unknown city conditions, and lack of training 
for other work, all tend to hold men on the farm 
even when they are not earning a subsistence 
wage there. 

Under present conditions reduced agricul- 
tural production, in so far as it is controlled 
consciously, is mainly the result of a prolonged 
period of low prices, which eat away the finan- 
cial strength of the farmers until they are 
driven from the land. In the course of time, 
as farmers become better organized and are 
able to profit by more complete information 
concerning probable demand and supply, our 
production should become better adjusted to 
demand. But prompt contraction of output, 

143 


OUR DEBT AND DUTY TO THE FARMER 


as practised by industry in times of unprofit- 
able prices, is not possible for the farmer. 

Nor is diversification a cure-all for the 
farmer’s troubles. The farmer needs no en- 
couragement to turn from crops or live stock 
which must be sold at unprofitable prices to 
other crops or live stock selling at better prices, 
if such changes are feasible. Too often indeed 
he makes such shifts inadvisedly, and thus 
simply moves from one loss period into an- 
other. During the summer of 1924 it seemed 
probable that the rush into dairying because of 
the relatively higher prices of dairy products 
might result temporarily in an unprofitable 
period for dairy producers. 

Following the decline in wheat prices which 
threw the Western wheat farmers into the 
depths of the depression, they were urged to 
diversify their farming, to grow less wheat and 
more corn and other feed crops, to keep dairy 
cows, hogs, and poultry. They were assured 
that if they would do so their troubles would 
disappear. Such changes can be put in prac- 

144 


CROP ADJUSTMENTS 


tice in any large way only after long education 
and development. If the wheat farmers within 
one year could have reduced the acreage of 
wheat one half and increased their production 
of hogs and dairy products correspondingly it 
is doubtful whether their condition would have 
been improved very much. They might have 
oot higher prices for their wheat for a year, 
but the increased production of dairy products 
and hogs would have been sold at a large loss 
and would have added to the difficulties of the 
farmers east of the Missouri River. The re- 
latively higher prices of wheat in turn probably 
would have stimulated a large increase of the 
wheat acreage in the Corn Belt States the year 
following. In the end farmers of both regions 
would have found their troubles increased. 
Swinging rapidly from overproduction of one 
crop to overproduction of another is no cure for 
farm depression. 

In practice it is impossible for the farmers of 
the Wheat Belt all at once to set up a system 
of diversified agriculture. Climatic conditions 

145 


OUR DEBT AND DUTY TO THE FARMER 


limit the crops that may be grown at a profit. 
The farms are equipped primarily for wheat- 
growing. Fences, buildings, pastures, all of 
which are necessary for the successful produc- 
tion of live stock, are often inadequate. More- 
over, not all efficient small-grain farmers have 
_ the knowledge or experience necessary for hog- 
raising or dairying, and many would certainly 
fail for a time at least. No level-headed 
farmer will all at once plunge into a different 
kind of farming; he wants to grow into it. As 
well urge the successful manager of a steel- 
mill to take over the management of a silk 
plant as to urge a wheat grower who knows 
nothing of the breeding, feeding, and care of 
dairy cows to launch suddenly into the dairy 
business. The transformation of a one-crop 
region into a region of diversified agriculture 
is an evolutionary process, the result of the 
gradual accumulation of experience and capi- 
tal. It is not an evolution that can be hastened 
very safely with money alone. Overstimula- 
tion in this direction will certainly do more 
harm than good. 
146 


CROP ADJUSTMENTS 


There is also a limit beyond which it is not 
possible to economize in expenditures. Sup- 
plies which are essential to the operation of the 
farm and maintenance of the family must be 
bought whatever the cost. The number of 
hours which the family can labor is limited. It 
is true that economy in the use of labor may 
take the form of making it more efficient. If 
this can be accomplished only by employing 
more equipment, the farmer is confronted with 
the difficulty that his funds may be depleted 
with his credit already overstrained. It should 
also be borne in mind that a reduction of cost 
or increase of efficiency that depends on the 
personal experience, ability, and initiative of 
the operator cannot be brought about as rapidly 
in an industry comprising over six million 
operators whose intelligence, education, ex- 
perience, and initiative vary widely as in an 
industry where the enterprises are operated by 
a few men who are selected for their outstand- 
ing ability and experience and who have the 
assistance of high-priced experts. 

Readjustments already made in agriculture 

147 


OUR DEBT AND DUTY TO THE FARMER 


have materially improved the situation. Yet 
the readjustment process in this direction is by 
no means completed. Where farmers are 
plainly confronted with ultimate defeat in their 
efforts to hold on, we may expect them to aban- 
don their farms as many others have done. The 
‘continuance of the cityward movement of popu- 
lation probably is necessary to restore the 
balance between agriculture and industry. 
Many farmers who are not making a living 
doubtless will turn to the cities for employment. 
Nevertheless, they should carefully consider 
the opportunities before them, and should not 
without forethought adopt an unfamiliar way 
of life. 

There is also room in some sections of the 
country for more diversification of crops and 
better organization of the farm business. 
Where geographic and economic conditions are 
favorable and farmers have sufficient means or 
ample credit, diversified farming may be ad- 
vantageously extended. A balanced system of 
farming promotes a better utilization of labor, 
more even flow of farm income throughout the 

148 


CROP ADJUSTMENTS 


year, less dependence upon credit, and less out- 
of-pocket expense. It is also a form of insur- 
ance against total loss in years when a single 
crop fails. 

Still further economies may be made by many 
farmers in their operating costs. From a 
recent study of a dairying area in Pennsylvania 
it appears that in the production of a hundred 
pounds of milk one half of the farmers ex- 
pended $1.20 in feed and some as much as $2, 
while one tenth of them fed less than 80 cents’ 
worth of feed to accomplish the same results. 
Balancing of rations, care of cattle, season of 
freshening, and quality of cows, all of which 
were directly subject to the farmers’ control, 
were found to account for most of these differ- 
ences in productive efficiency. 

Another striking illustration of waste in 
farming methods comes out of the spring wheat 
region, where dockage in wheat has grown to 
enormous volume. In ‘‘The Wheat Situation,’’ 
a report which I made to the President in No- 
vember, 1923, I called attention to this problem. 
In that report I said: 

149 


OUR DEBT AND DUTY TO THE FARMER 


In the northwest spring wheat region heavy and 
unnecessary losses are sustained by wheat farmers 
in growing and putting on the market wheat contain- 
ing a large amount of foreign material which can 
be removed, According to the records of the Minne- 
sota State Grain Inspection Department dockage has 
gradually increased from 1.9 per cent. of all wheat 
shipped to Minnesota markets in 1902 to 4.2 per cent. 
in 1922. During the twenty-one years covered in 
this period it is estimated that almost 110,000,000 
bushels of dockage were shipped to these markets. 
If shipped separately to market, this dockage, it is 
estimated, would have required over 84,000 freight 
cars for its transportation. Farmers of the North- 
west shipped to Minnesota markets in the crop year 
of 1922 alone over 7,500,000 bushels of dockage, 
using for this purpose about 5,800 cars. Had this 
equipment been available for the shipment of clean 
wheat, the car shortage in the Northwest in the crop 
movement season of 1922-23 would no doubt have 
been less serious. It should also be observed that 
market receipts do not fully measure the amount of 
dockage since a part of it is removed at the farm 
and at local elevators. 

Spring wheat farmers are taking heavy losses on 
their dockage in more ways than one. Weeds are re- 

150 


CROP ADJUSTMENTS 


ducing wheat yields and some lands have become so 
foul that they are no longer profitable for wheat pro- 
duction. Harvesting and threshing weeds with the 
wheat adds materially to the cost of wheat produc- 
tion. At a threshing rate of 7 cents per bushel, it 
is estimated that farmers in Minnesota, North Dakota, 
South Dakota, and Montana paid over $675,000 to 
thresh the dockage in their 1922 wheat crop. 

A still more important item of loss is the cost of 
freighting dockage to market. The average dockage 
assessed per car in 1922 by the Minnesota State Grain 
Inspection Department was 54 bushels. The freight 
charges on this dockage between Larimore, N. Dak., 
and Minneapolis amounted to $5.67 per car. If, for 
illustration, the Larimore-Minneapolis freight rate 
be taken as an average rate on wheat shipped to 
Minnesota markets and be applied to the total dock- 
age assessed in 1922 it appears that the enormous 
sum of almost $800,000 was paid to the transporta- 
tion companies to haul the dockage of that season to 
these markets. An effective way, in short, to reduce 
transportation costs is to remove the foreign material 
before shipment is made. 

Losses resulting from foreign material in wheat 
may be materially reduced by better crop rotations 
and cultural methods as well as by cleaning both seed 

151 


OUR DEBT AND DUTY TO THE FARMER 


and market wheat. The one-crop system in the 
Northwest has resulted in weed-infested lands, dirty 
wheat, and reduced yields. The practice of sowing 
seed wheat containing a high percentage of weed 
seed has been altogether too common. A _ survey 
made in Minnesota and the Dakotas in 1921 dis- 
. closed the fact that 96 per cent. of the farms visited 
were drilling with the wheat from 1,000 to 500,000 
foreign seeds per acre. The employment of cleaning 
devices which have been perfected for farm, thresh- 
ing machine, and elevator will materially reduce this 
financial leakage in the farm business. ) 


Farmers also can do much to improve and 
standardize their products to conform with 
market demands. Consumers as a rule are 
willing to pay for products of superior quality. 
As standards of living advance and competition 
erows, farmers will find it increasingly im- 
portant to put standard goods on the market. 
While the quality of many farm products is 
materially affected by weather conditions, still 
there remains much farmers may do to stand- 
ardize their produce and better the prices they 
receive. 

152 


CROP ADJUSTMENTS 


The entire range of adjustments which 
farmers have made and must continue to make 
in their farm operations plays, of course, a 
fundamental part in the improvement of the 
agricultural situation. After all, however, 
they are changes which take place slowly, and 
the beneficial effects are often not realized un- 
til it is too late. Adjustments in crops and 
economies in production alone will not lift the 
excessive burden which many farmers had 
thrust upon them in the aftermath of the war. 
The effective remedy is a fairer price for farm 
products. 


153 


CHAPTER Ix 


COOPERATION 


help themselves is the marketing of 
their products through their own cooperative 
associations, of which there are now perhaps 
ten thousand in the country. Most of these 
associations are small, such as cooperative 
creameries, grain elevators, live-stock shipping 
associations, and the like, the membership be- 
ing confined to the farmers of a local com- 
munity who live within hauling distance of the 
headquarters of the association. These small 
associations when efficiently managed are able 
to effect substantial savings by reducing the 
cost of handling products. 

In recent years there has been a considerable 
increase in the number of larger associations 
which usually handle but one commodity and 

154 


()%. of the means employed by farmers to 


COOPERATION 


which seek to serve their members not alone by 
reducing handling costs but by merchandising 
the commodity handled; that is, by feeding it 
into the market in an orderly way with the view 
of securing the best price obtainable. The 
fruit growers of California were pioneers in 
the organization of the larger commodity co- 
operatives, many of which have been very suc- 
cessful. Now there are similar organizations 
handling cotton, tobacco, potatoes, and the like. 
They have memberships running into many 
thousands and at times are able to exert con- 
siderable influence on the price of the commod- 
ity handled, although none as yet handle 
enough of the crop to effectively control the 
price. While there have been many discourag- 
ing failures of farmers’ cooperatives, gradually 
the principles which make for success in 
cooperation are becoming better understood. 
It is reasonably certain that in the course of 
time farmers will market most of their prod- 
ucts through cooperative associations, thereby 
eliminating much of the unreasonable toll now 


collected by middlemen. 
155 


OUR DEBT AND DUTY TO THE FARMER 


The benefits to be derived from cooperative 
effort are not by any means limited to savings 
in handling costs but include the standardiza- 
tion and improvement of the quality of crops 
grown and some influence on the price at which 
they are sold. Indeed, in the case of some > 
crops it may even be possible through codper- 
ation in time to exercise some influence over 
the amount of production. While these latter 
objectives can be reached only after years of 
education, experience, and training of man- 
agers, they should always be kept in sight. 

Hard times on the farm always stimulate the 
growth of farmers’ organizations. The harder 
the times the more readily farmers listen to 
preachers of cooperation and the more freely 
they join cooperative associations. The result 
is that many cooperatives are organized be- 
fore the farmers have a clear understanding of 
just what codperation means and what the 
members must do to make the effort successful. 
They join under an emotional impulse born of 
their difficulties and intensified by convincing 
talkers, and become discouraged when called 

156 


COOPERATION 


to deal with the difficulties which always attend 
the launching of a successful cooperative. No 
cooperative can succeed without the loyal, in- 
telligent, and active support of its members, 
growing out of a firm conviction that the asso- 
ciation is needed, a complete understanding of 
the way in which it is conducted, and an active 
participation in its affairs. 

Good sound growth in the cooperative move- 
ment has been somewhat retarded in recent 
years by over-enthusiastic advocates who have 
held it up as a panacea for the ills from which 
farmers are suffering. Some who seem to be 
entirely ignorant of the principles of coopera- 
tion and who have had no experience whatso- 
ever have gone about the country telling 
farmers that all they needed to do was to 
organize cooperative associations; that then 
their troubles would disappear; and that they 
could then cope with organized business. They 
overlook that mere organization of codperative 
associations is not the end to be attained, but 
only the beginning. It is only the making of a 
business machine which may or may not work. 

157 


OUR DEBT AND DUTY TO THE FARMER 


Its success depends on finding men capable of 
running it efficiently, on the continued loyal 
support of the membership, and on the volume 
of business done. The desire of occasional 
over-ambitious leaders to bore with a big auger . 
and do something spectacular in organizing 
cooperative associations has been the cause of 
some disastrous failures which have discour- 
aged farmers and furnished ammunition to 
enemies of cooperation. Every such failure 
sets back the cooperative movement. In large 
cooperative undertakings it is especially neces- 
sary to follow none but proved leaders of suc- 
cessful experience and of proved ability and 
integrity. 

People who point to cooperation as the quick 
way out of such economic difficulties as agri- 
culture has gone through and still is experienc- 
ing no doubt mean well, but they are directing 
farmers up an impassable road. Successful 
cooperative associations will help, just as re- 
duction of operating costs, economy, and hard 
work help, but none of these get at the source 
of the trouble. If three fourths of the farmers 

158 


COOPERATION 


were members of strong cooperatives and will- 
ing to subject themselves to severe discipline in 
the production and marketing of their crops, 
they might be able to control the prices of many 
of their products. But if such a state of affairs 
is ever brought about it will not be for many 
years. Nevertheless, the need for strong co- 
operative marketing associations cannot be 
over-emphasized. They are absolutely neces- 
sary to bring about efficient and economical 
marketing and the standardization of crops. 
But they should be truly codperative, controlled 
by their members, and kept free from domina- 
tion by government agencies or commercial 
interests. 

The mistaken belief that by the mere organi- 
zation of codperative enterprises the farmers 
can be lifted overnight from the valley of de- 
pression to the peak of prosperity has prompted 
some curious suggestions of federal participa- 
tion. Men who have had successful experience 
in cooperation or who understand cooperative 
principles have no delusions as to the Govern- 
ment’s proper function with regard to them. 

159 


OUR DEBT AND DUTY TO THE FARMER 


They ask only a free field and no special favors. 
They know very well that government efforts to 
organize cooperative associations, or govern- 
ment interferences in the conduct of such asso- 
ciations, no matter how well-intentioned, is 
utterly against the principles of cooperation 
and can do nothing but harm. They know that 
no cooperative enterprise can succeed perma- 
nently unless it is built on the broad base of 
loyal and intelligent voluntary membership, 
which has learned the benefits of collective 
action, and which is capable of developing its 
own leadership and managing its own affairs. 

Some new converts to the cooperative move- 
ment urge that the Government should proceed 
at once to organize the farmers, whether they 
wish it ornot. They seein almost every county 
an agricultural agent employed and paid jointly 
by the Federal Government, the State, and the 
farmers of that particular county. So they 
ask, why should not this agent help them organ- 
ize, speak at their meetings, and solicit mem- 
berships? Now, it must be obvious that if 
public servants, such as county agents, should 

160 


COOPERATION 


be used to urge farmers to join some particular 
cooperative, the Government puts itself in the 
impossible position of being a guarantor, at 
least by implication, of the success of the enter- 
prise without having an authoritative voice in 
its management. 

Again, strange as it may seem, often there is 
violent conflict between cooperatives. In the 
same county there may be two or three differ- 
ent codperative associations competing for 
membership and for business. This strife 
among the brethren, both in cooperative and 
general farmer organizations, has been very 
discouraging. How is the Government through 
the county agent to choose between them? ‘The 
county agent is paid by all of the people. By 
what right may he actively solicit membership 
and funds for one cooperative and not for an- 
other? Can he ‘‘boost’’ one farm organization 
and not another? The duty of the county agent 
is to help all that will accept help in his work 
of education, but he should not engage in pro- 
motion and business activities. 

This confusion in the minds of promoters of 

161 


OUR DEBT AND DUTY TO THE FARMER 


cooperative enterprises as to what the Govern- 
ment properly may do and may not do is shared 
by some who seek to secure federal legislation. 
There have been before Congress during the 
past two years a number of bills dealing with 
_this matter. Some of them seek only to provide 
more efficient government service, but others 
go so far as to put the Government squarely 
into the business of promoting so-called co- 
operative associations. They would set up a 
great federal overhead agency and secondary 
boards of various kinds, and would have these 
bodies assume control of a number of highly 
important activities, such as the dissemination 
of market news. This and other services are 
already carried on efficiently by the federal 
Department of Agriculture. Every interest of 
the farmer demands that they should be kept in 
control of a well-organized, impartial, and per- 
manent government department, devoted to the 
service of agriculture and free from entangling 
business alliances. 

I do not know of any one who has had an 
important part in the conduct of any success- 

162 


COOPERATION 


ful cooperative association for any length of 
time, nor any one who understands the funda- 
mental principles which cooperative associa- 
tions must observe to succeed permanently, who 
favors government activities of the sort con- 
templated by these mischievous bills. Men 
who are well informed either through study or 
practice know that the relationship of the 
Government to codperation should be one of 
service; that it should help farmers market 
their crops just as it helps them produce, not 
by doing the work, but by supplying informa- 
tion which they cannot get for themselves. To 
go further than this is to injure rather than aid 
cooperative marketing. 

The Government through the Department of 
Agriculture studies soils, cultural methods, 
varieties of plants adapted to various locali- 
ties, methods of breeding and feeding live stock, 
the control of diseases of plants and animals 
—in short, everything which has to do with 
production. It makes the results of these 
studies available through printed bulletins, 
through its press service, and by word of mouth 

163 


OUR DEBT AND DUTY TO THE FARMER 


through county agents and specialists. Bui 
the Government does not plow the ground, sow 
or harvest the crops, or feed the animals. 

So it should be in the field of marketing. 
The Government can properly study and make 
known the principles upon which successful 
cooperation must be built. It can point out 
conditions making for success or failure. It 
can present historical facts which will enable 
farmers to profit from the experience in co- 
operation of other farmers at home and abroad. 
It can establish uniform official standards as a 
basis on which business can be transacted, and 
it can provide a news service and an extension 
service to present information on which 
farmers can act more intelligently in their 
codperative undertakings. But the Govern- — 
ment cannot consistently or properly or safely 
organize or manage cooperatives any more 
than it can properly send federal agents into 
the fields and feed-lots and plow, sow, reap, or 
feed. The proper function of the Government 
is to do what is necessary to help farmers help 

164 


COOPERATION 


themselves both in production and in market- 
ing. Farmers do not want more. 

The vast amount of work which has been 
done by the Government to promote better 
marketing and especially to help in the sound 
organization of codperative associations does 
not seem to be generally known. For more 
than ten years past the Department of Agricul- 
ture has been collecting and disseminating in- 
formation about codperation. During the past 
two years an unusual amount of attention has 
been given to this work. There are approxi- 
mately 10,000 farmers’ cooperative associations 
in the United States. The department has 
collected information concerning about 8,500 of 
these associations, and has shown their form 
of organization, the character and volume of 
business done, and the marketing methods used. 
Detailed studies have been made of some of 
the larger successful codperatives for the 
purpose of making known the principles which 
have enabled them to succeed, the troubles they 
have met, and how these troubles have been 

165 


OUR DEBT AND DUTY TO THE FARMER 


overcome. Studies also have been made of the 
associations that have failed, and the reasons 
for their failure have been pointed out. All 
of this information has been published and is 
freely available for the use of farmers who are 
- trying to organize codperatively. 

The department estimates and forecasts crop 
and live-stock production, and issues reports on 
the volume of crops harvested with comparisons 
with other years. It maintains a compre- 
hensive market news service, which reports 
shipments, receipts, prices, the condition of 
commodities, and other important information 
by telegraph, leased wire, radio, and mail. It 
establishes standards for farm products and 
inspects products at shipping points and at 
terminal markets. It studies costs of produc- 
tion and costs of marketing. It suggests ac- 
counting systems for codperative associations 
handling various commodities. It studies for- 
eign competition and demand, supervises grain 
and live-stock markets, and performs many 
other services. 

The most valuable help the Government can 

166 


COOPERATION 


give to cooperative associations is by strength- 
ening the work already being done in the De- 
partment of Agriculture by making the service 
activities more generally available and by add- 
ing certain other helpful services. For ex- 
ample, it would be helpful to codperative 
associations if they should adopt generally 
carefully worked-out accounting systems, and 
if they were subjected to at least an annual 
audit by a government agency. Many such 
associations have failed from the lack of busi- 
nesslike accounting systems and from purely 
formal and inadequate audits which did not 
give the members warning of conditions need- 
ing prompt correction. The setting up in the 
Department of Agriculture of a division of ac- 
counts and audits for the use of codperative 
associations which sought its help would con- 
stitute a valuable additional service. Such as- 
sociations could afford to pay the actual cost 
of this service. 


167 


CHAPTER X 


ADJUSTMENTS IN FARM INDEBTEDNESS, TAXES, 
FREIGHT RATES, AND OTHER COSTS 


UNDREDS of thousands of farm owners 
Li have lost their farms during the past 
four years, and hundreds of thousands of ten- 
ants have lost their property. Hundreds of 
thousands of other farmers have been able to 
continue only because of the leniency of their 
creditors. Although they are insolvent, they 
are holding on in the hope of better times. In — 
many cases creditors have been lenient because 
if they should foreclose they would not get 
enough to satisfy their accounts, and conse- 
quently they have encouraged debtors to go 
ahead and have even extended them small ad- 
ditional credit. It is to be regretted that some 
of these creditors, having encouraged the 
farmers to hold on, have closed down upon 

168 


ADJUSTMENTS IN FARM COSTS 


them as soon as their assets became sufficient 
to liquidate their debt. No doubt others are 
watching for a similar opportunity. Many 
creditors, however, have been sympathetic and 
have shown a willingness to help their debtors 
not alone by extending time of payment but 
by canceling some interest. This is good policy 
and should be more generally followed. It is 
better for the creditor to share the losses of a 
good farm debtor, if the latter can thereby 
work out, than to exact the full amount and 
force him to the wall. The question these 
heavily involved farmers must determine is 
whether they should make an effort to pay out 
or whether they should take the first favorable 
opportunity to liquidate their affairs and make 
a fresh start. 

To reach a satisfactory and reasonably safe 
answer to this question a number of matters 
must be considered with great care. Is there 
a prospect that prices of farm products will 
return to a fairly normal relationship with 
prices of other things and continue in about 
that relationship? Can the debts be refunded 

169 | 


OUR DEBT AND DUTY TO THE FARMER 


in such a way as to give time in which to pay 
them? Is there any hope of material reduc- 
tions in such fixed expenses as taxes and 
freight rates? These questions are of much 
more importance to farm owners than to 
renters. The latter operate on less capital. 
They can readjust their operations more 
readily and can bargain from one year to the 
next as to what rent they shall pay. Also they 
can liquidate on much shorter notice and with 
less loss. 

Passing for the moment the question of price 
relationships, let us see what are the conditions 
for refunding debts, both mortgage and per- 
sonal. These conditions are more favorable 
now, both as to interest rates and terms of pay- © 
ment, than perhaps ever before. Until two 
years ago $10,000 was the limit which could be 
loaned to one individual on farm mortgage by 
the federal farm loan banks. This low limit 
made federal farm loan credit unavailable to 
many farmers in those regions in which the soil 
is most productive and highest priced. Con- 
gress has increased the limit to $25,000, thus 

170 


ADJUSTMENTS IN FARM COSTS 


making this long-time and low-interest credit 
available to the average quarter-section farmer 
wherever he may live. The competition of 
federal banks has operated to reduce the inter- 
est_and improve the terms of the various other 
farm loan agencies, so that at the present time 
a reasonable amount of mortgage credit can be 
had under most favorable conditions. The 
rather complicated manner in which the federal 
loans are made has tended to restrict the freest 
use of this credit agency. There is no reason, 
however, why the requirements cannot be met if 
farmers will study them. Now js an excellent 
time for farmers who are carrying mortgages 
approaching maturity to turn them into long- 
time mortgages accepted by the federal 
agencies. This applies both to those who are 
heavily involved and those who are not. A sav- 
ing of 1 per cent. or even half of 1 per cent. on 
the interest rate makes a substantial saving on 
the average farm debt, and the placing of a 
mortgage to run thirty-three years without 
intermediate renewal removes a load of anxiety 
and avoids expensive renewals. Every farm 
171 


OUR DEBT AND DUTY TO THE FARMER 


organization should have a division whose duty 
is to inform its members how to get loans from 
the federal land banks, and to help them 
organize local farm loan associations for the 
purpose of obtaining loans. Farm organiza- 
tions should codperate with one another to 
this end. 

Farm owners who have not exhausted their 
mortgage credit but who are carrying a large 
amount of personal indebtedness may well con- 
sider the advisability of converting this per- 
sonal debt into long-time mortgage debt, now 
that it can be done on such favorable terms. 
In this way they would cut down interest 
charges and get away from the danger of being 
pinched by creditors and compelled to sell 
crops or live stock when prices are unfavorable. 

It is important that farmers should know the 
terms of the Agricultural Credits Act of 1923, 
described in Chapter V of this book, and the 
manner in which they can avail themselves of 
its benefits. This act provides intermediate 
credit for farmers, individually and collectively, 
on more favorable terms than have ever been 

172 


ADJUSTMENTS IN FARM COSTS 


available. It was not designed to replace ex- 
isting credit agencies such as local banks, but 
rather to assist them in extending to farmers 
the kind of credit they must have to conduct 
their business efficiently. Local bankers should 
cooperate with their farmer customers to make 
this credit fully available. In the long run it 
will be to their advantage to do so. If they are 
unwilling to do this, the provisions of the act 
make it possible for farmers to form local 
credit associations of their own. Here also the 
various farm organizations should inform 
their members how to proceed. Just as the 
Federal Farm Loan Act gives opportunity to 
refund mortgage credit at low interest rates 
and on favorable terms, so does the Agricul- 
tural Credits Act afford means of refunding or 
securing new personal credit on terms adapted 
to farm needs and at considerable saving of 
interest. 

I have already referred to the way in which 
high taxes seriously impede the recovery of 
agriculture. Why are taxes so much higher? 
The explanation will be found partly in the 

173 


OUR DEBT AND DUTY TO THE FARMER 


high prices which have increased the cost of 
conducting the business of government, partly 
in extravagance or unwise expenditures, and 
partly in the natural tendency for government 

activities to expand with the growth of popula- 
~ tion and the parallel increase of social wants. 
During the years of the war, taxes were held 
down by the general demand for economy in 
local expenditures and by the fact also that the 
attention of the public was diverted from 
purely local interests to the larger task of 
winning the war. With the conclusion of the 
war, however, sentiment veered in the opposite 
direction. Commodity and food prices re- 
mained abnormally high, the purchasing-power 
of the tax dollar had dropped to low levels, and 
more funds were needed to conduct government 
activities already established. Furthermore, 
the optimism created by high prices revived 
and enlarged the demand for highway and 
school improvement programs which had 
been temporarily postponed. These influences 
brought on tax increases which were to be ex- 
pected, but which unfortunately took effect at 

174 


ADJUSTMENTS IN FARM COSTS 


a time when the farmer’s income was at low 
ebb. Taxes made their greatest advance in 
1921, the very year when the losses of farmers 
were heaviest. Since then taxes have still fur- 
ther increased. 

Clearly, the farm tax situation requires cor- 
rection. Extravagant and ill-advised public 
improvements account for much of the present 
tax burden, but these improvements have al- 
ready been made, and taxes must be maintained 
at high levels to pay for them. The best we 
can do is to avoid additional unnecessary 
improvements. 

Nor am I sure that we would profit in the 
long run by materially curtailing the legitimate 
functions of government. With advancing 
standards, we rightfully demand more efficient 
government, better schools, better roads, and 
other facilities which serve our social and busi- 
ness needs, and we must pay if we would have 
them. The farmer desires and needs these 
services as much as any one. He is willing also 
to contribute his just share toward their main- 
tenance. He has a right, however, to ask that 

175 


OUR DEBT AND DUTY TO THE FARMER 


the costs of such services be reasonable and 
equitably distributed, and that the share which 
he is required to pay be not above his ability 
to pay. 
<A large part of the farmer’s tax is levied and 
spent within his own community. Recent stud- 
ies have shown that from 75 to 95 per cent. of 
the property taxes in various parts of the 
country are levied by local government units 
and expended for local purposes of which 
schools and highways are among the most im- 
portant. Some persons are therefore inclined 
to urge that farmers themselves are to blame 
for their high taxes. There is some justifica- 
tion for this position, but it must not be over- 
looked that individual and community needs, 
as well as public sentiment, exert a powerful 
influence in the matter of public improvements. 
Farmers are usually willing to assume substan- 
tial burdens in support of good roads programs, 
but campaigns for road improvement are pro- 
moted most actively by other road users who 
do not contribute enough to the construction 
and maintenance of such roads. School im- 
176 


ADJUSTMENTS IN FARM COSTS 


provement programs, which at times are per- 
haps rather too ambitious for the community 
to support, have been promoted in various parts 
of the country by many who pay very little 
under present taxing methods. Many school 
districts have been laid out in such a manner 
as to place most of the school tax on the farmer 
without giving him a corresponding voice in 
the voting of levies. It may also be observed 
that with the centralization of educational 
authority in some States the local districts 
have continued to levy their taxes for school 
purposes, while at the same time the State has 
set up minimum educational requirements 
which have resulted in materially higher tax 
rates. 

Perhaps a more important reason, however, 
why farmers are now carrying taxes which in 
many instances have become intolerable and 
threaten to become confiscatory, will be found in 
our present system of taxation. State and lo- 
cal taxes are collected from farmers principally 
by means of the general property tax. While 
the tax is levied upon the selling or market 

Lie 


OUR DEBT AND DUTY TO THE FARMER 


value of property, normally it is paid out of 
income, and the tax too frequently has little or 
no relation to the amount of the income. 

The property tax covers practically all of the 
farmer’s property, but it falls mainly on the 
land which constitutes the major part of his 
wealth. Under our methods of taxation, farm 
lands are assessed for taxing purposes on the 
basis of their selling or market value. It has 
been found, however, that the selling value of 
land is not based alone upon its present earn- 
ines but to a very large extent upon its spec- 
ulative value. From a recent study made of 
this subject it appears that the market value of 
farm land in the Middle West was 42 to 56 per 
cent. higher in 1920 than it would have been if 
the net cash rent of the prosperous year 1919 
had been capitalized at the current rate of in- 
terest on first mortgages. The high land 
values of those years were largely due to the 
fact that buyers and sellers of land expected 
the income from land to keep on increasing. 
The opposite happened. When the prices of 
farm products broke, the income from land 

178 


ADJUSTMENTS IN FARM COSTS 


dropped to low levels and land values dropped 
likewise. A large part of the land values of 
1920 were ‘‘blue sky’’; that is, they rested on 
an expected annual increase in net inco; 1e which 
was not realized. Farm income, as a matter 
of fact, declined instead of increased. The 
selling or market value of farm land is subject 
to the uncertainties of the future. As a basis 
for taxation it is highly speculative. Farmers 
may properly object to paying taxes on some- 
thing which they do not possess. 

As a result of our public land policy large 
reserves of land have accumulated in the hands 
of private owners who must carry them until 
they are needed. Much of this land should be 
used for grazing or the growing of forests, but 
high taxes serve to discourage such use. On 
the other hand, high taxes have been an im-~- 
portant influence in forcing lands of this kind 
into use for the production of crops. The re- 
sult has been increasing competition for farm- 
ers in the older and developed regions and 
hardship on those attempting to farm new and 
inferior lands. 

179 


OUR DEBT AND DUTY TO THE FARMER 


It is apparent that taxation of farm land as- 
sessed on the basis of selling value, whether ap- 
plied to developed or undeveloped regions, is 
open to serious criticism. As an alternative, 
_ students of the problem have suggested that we 
modify our methods to conform more nearly 
with those employed in several European coun- 
tries. Some European countries tax farm 
lands on the basis of their net earnings. It has 
been objected that the flow of revenue from a 
property tax based on net earnings would be 
uncertain and subject to considerable fluctua- 
tion from year to year. This is probably true, 
but under the present system, which produces 
a regular and steady flow of revenue, the 
farmer is required to pay annually a large and 
relatively uniform tax regardless of the size 
of his income. The question may well be asked 
if the State is not better able to assume this 
burden of uncertainty than the farmer. In- 
deed, much of this uncertainty from the view- 
point of the State might be eliminated through 
readjustments in the tax system. The general 
property tax does not rest equally on all classes 

180 


ADJUSTMENTS IN FARM COSTS 


of property. There is evidence to indicate that 
certain classes of urban real estate in some 
parts of the country are not taxed as heavily 
as farm lands, even though the income derived 
from the former is on the average larger and 
more stable than that yielded by farm lands. 
City real estate itself is in many instances over- 
taxed. While the general property tax has 
been a fairly satisfactory source of revenue in 
the past, its administration must undergo modi- 
fication if it is to give satisfaction in the future. 

There is another defect in our system of 
property taxation which is perhaps even more 
glaring and which accounts in considerable 
measure for the excessive taxes at present 
borne by farmers. This in plain words is the 
tax evasion of various classes of personal 
property. We have in the past depended 
largely upon the general property tax for 
State and local revenues, and in fact at the 
present time obtain about three fourths of such 
taxes from this source. This method gave 
reasonable satisfaction in earlier times because 
a larger portion of the personal property was 

181 


OUR DEBT AND DUTY TO THE FARMER 


in tangible form and could not readily escape 
assessment. With the growth of industry and 
commerce, however, an increasing proportion 
-of our national wealth is taking the form of 
stocks, bonds, and other kinds of property 
which are not regularly placed on the tax rolls. 
As a result the property of the farmer which is 
in plain view of the assessor pays a larger part 
of the total tax bill than his share of the na- 
tional wealth warrants. It is, of course, a well- 
established fact that a large amount of personal 
property in the urban centers escapes the tax 
assessor, although we have no definite measure 
of this evasion. Professor Seligman in his 
‘‘Hissays in Taxation’’ makes the following 
significant statement on this point: ‘‘Personal 
property nowhere bears its just proportion of 
the burdens; and it is precisely in those local- 
ities where its extent and importance are the 
greatest that its assessment is the least. The 
taxation of personal property is in inverse 
ratio to its quantity; the more it increases, the 
less it pays. The reason is plain. So far as 
it is intangible, personal property escapes the 
182 


ADJUSTMENTS IN FARM COSTS 


scrutiny of the most vigilant assessor; so far as 
it is tangible, it is purposely exempted in its 
chief form, as stock in trade, in our commercial 
centers. In the mad race for wealth it is con- 
sidered dangerous for the local assessors in 
large cities to list the merchant’s capital, with 
the possible result of driving it away to local- 
ities more favored by their financial officers.”’ 
A specific illustration may be of interest. In 
1889 the state controller of New York was con- 
vinced that the value of taxable personal prop- 
erty in the State exceeded the value of real 
estate, yet as late as 1919 the total assessed 
valuation of the former class of property was 
only 7.7 per cent. of that of real estate. 

What is needed above all to ease the tax bur- 
den on the farmers is the tapping of new 
sources of revenue and a wider diffusion of 
the public burdens. Properties as well as in- 
comes which now are escaping their fair share 
of public taxes should be required to contribute 
according to equitable standards of taxation. 
How these sources of revenue may be reached 
is a problem for the student of taxation, but 

183 


OUR DEBT AND DUTY TO THE FARMER 


farm organizations may well give it some study. 

Local farm communities are now carrying 
the entire cost of certain functions and services 
from which a larger public, even the State and 
the Nation, derive distinct benefits. The good 
roads of many communities are not used only 
by those who now largely pay for them. Fed- 
eral aid to States for road building equals one 
half the cost of primary roads, and taxes of 
various kinds collected by the Federal Govern- 
ment from the automobile and accessory in- 
dustries more than equal federal expenditures 
for roads. If States more generally would de- 
pend on vehicle and gasolene taxes for road- 
building purposes, the farmer’s tax burden for 
this purpose would be materially reduced. The 
cities which obtain a large part of their new 
blood from the country and the State and the 
Nation have a vital interest in the education of 
the farm boy and girl. Since it is apparent 
that many services now regarded as of purely 
local value directly benefit larger groups, it 
would seem reasonable that their cost should 

184. 


ADJUSTMENTS IN FARM COSTS 


be shared also by these larger groups. In fact, 
while it is urgent that local taxes should be re- 
duced, it is not so evident that State and na- 
tional taxes should be correspondingly reduced. 
There is need of a deeper appreciation of the 
community of interest between the country on 
the one hand, and the city, State, and Nation on 
the other, and likewise of a broader sharing 
of public burdens. 

In his time of greatest distress when prices 
of most of his products were at the lowest point 
and he was being ground into the earth by the 
combination of low prices for his products and 
high prices for everything he had to buy, the 
farmer was compelled to take on a heavy addi- 
tional burden in the form of large increases in 
freight rates. This burden consisted not alone 
of higher rates on farm products to primary 
markets but of advances also on things the 
farmer buys. Since the high point there have 
been some decreases in freight rates, but rates 
on products of agriculture are still 50 per cent. 
and more above the pre-war level. They are 

185 


OUR DEBT AND DUTY TO THE FARMER 


higher than farmers can afford to pay, espe- 
cially farmers who ship by rail most of the 
products of their fields. 

It must be admitted that the railroads have 
had their troubles. During the period of gov- 
ernment control large additional operating 
costs were saddled on them, and they must pay 
high prices for what they buy. Unlike the 
farmers, however, the railroads were assured 
during the control period a net return equal 
to that of the three pre-war years, this period 
being in the opinion of many authorities the 
most profitable in railroad history. Following 
this period they were granted rates which yield © 
many railroads a substantial profit on their in- 
vestment. The large increases in wages, both 
direct and through changes in working rules, 
which were permitted during the war, in the 
main still continue, but our rate-making policy 
aims to yield a return above all such costs. 

It must be admitted further that first-class 
rail service is required by agriculture, espe- 
cially for live stock and perishables. Losses 
from poor service may easily amount to more 

186 


ADJUSTMENTS IN FARM COSTS 


than the freight paid, as the farmer knows from 
sad experience. Good service requires that 
road beds be maintained, that rolling-stock be 
kept in good repair, and that wages be ade- 
quate. That takes money, and the money must 
come in large part from freight receipts. 

But after making full allowance for these 
facts, freight rates on most farm products are 
higher than the farmer can afford to pay with 
farm product prices as they are. Increases 
that have been allowed on farm products are 
inequitable when compared with rates charged 
on other commodities. They discriminate 
against agricultural regions remote from 
market where agriculture was established on 
the basis of much lower rates and with the ex- 
pectation that as traffic increased rates would 
be lowered instead of raised. They discrimi- 
nate in favor of farmers of other lands who 
compete with our farmers both at home and in 
foreign markets. 

Notwithstanding these contentions, which are 
believed to be just, most unsatisfactory prog- 
ress has been made in securing fairer rates for 

187 


OUR DEBT AND DUTY TO THE FARMER 


agricultural products. Most of the roads in 
agricultural territory which depend on agri- 
culture for a large part of their revenue insist 
that at the present rates their returns are not 
equal to the income sought for them by Con- 
gress and that any reduction in farm rates will 
be ruinous to them. The roads in the more 
densely populated industrial regions handle 
less agricultural freight, and reductions by 
them would not give the relief needed. The 
railroads and those industries which furnish 
rail equipment insist that they can stand no 
reduction in returns. Their employees, al- 
though relatively better off than before the war, © 
likewise resist reductions in pay. Each group 
and interest seems determined to hold the ad- 
vantage gained. The farmer, whose products 
have less buying-power than before the war, is 
required to pay more to everybody and seems 
helpless. 

The farmer wants the workman well paid 
because well-paid workmen will buy freely of 
farm products at fair prices. He wants the 
railroads well paid because he knows that 

188 


ADJUSTMENTS IN FARM COSTS 


otherwise he cannot receive good transporta- 
tion service. The farmer would much rather 
have an increase in his own income which 
would enable him to pay present rates and 
wages than to have rates and wages reduced. 
But unless higher prices for agricultural prod- 
ucts come quickly and with some assurance 
that they will remain in a fair ratio to the 
prices of other things, the farmer will not be- 
come reconciled to the theory that the Govern- 
ment shall assist the railroads to get a fair net 
return, and shall directly and indirectly assure 
workmen high wages, particularly when he 
must pay such a large part of the bill with the 
purchasing-power of his own products much 
below normal. The farmer is both a wage- 
earner and a capitalist, and is entitled to ex- 
actly the same consideration as other wage- 
earners and other capitalists. 

The railroad question has been in politics for 
fifty years, which is long enough. But it will 
remain in politics and be more disturbing than 
ever unless a more equitable arrangement is 
reached which will more fairly distribute be- 

189 


OUR DEBT AND DUTY TO THE FARMER 


tween agriculture and other industries the 
burden of maintaining our transportation sys- 
tem. Agriculture and transportation are the 
two greatest industries of the Nation. They 
are necessary to one another; neither can af- 
ford to acquiesce in a condition which is un- 
just to the other. The present condition is 
fraught with danger to both and to the Nation 
as well, and unless it is corrected by con- 
structive thinking there is danger that it may be 
made worse by ill-considered political action. 

What I have said about the need of reducing 
freight rates applies equally to prices of com- — 
modities which farmers must buy. Many of 
the costs entering into the prices of manu- 
factured goods may be hard to _ control. 
Nevertheless economies can probably be made 
which will lessen these prices and hasten the 
return of fair price relationships. Industries, 
it is true, have made economies which have re- 
duced costs of production even though wages 
have remained high. On the other hand, costs 
of distribution have climbed and have more 
than offset economies in manufacturing, with 

190 


ADJUSTMENTS IN FARM COSTS 


the result that retail prices are now too high. 
There is real need, in short, of thorough over- 
hauling of our system of distribution. Means 
should be adopted to reduce the present exces- 
sive margins between producer and consumer. 
Business men whose understanding of the farm 
problem is sound and sympathetic will use 
their best efforts to hasten these results. 


191 


CHAPTER XI 


RESTORATION OF FAIR PRICE RELATIONSHIPS 


HE sufferer from sciatica or similar 
‘i disease may secure temporary relief 
from paroxysms of pain by hot fomentations 
and may lessen the frequency of acute attacks 
by medicines which stimulate the organs of 
elimination and have a quieting effect on the 
nerves. He gets no permanent relief, however, 
and no assurance against recurring attacks un- 
til the cause is discovered and removed. 

Just so the farmer may find some relief from 
his economic difficulties by cutting down ex- 
penditures, by reducing production costs, by 
reducing marketing costs through cooperative 
associations, and by readjusting production. 
Because of weather conditions he may find his 
income temporarily increased. In 1924, for ex- 
ample, our wheat farmers enjoyed the unique 
experience of a very large crop and a fairly 
good price at one and the same time. As a 

192 


FAIR PRICE RELATIONSHIPS 


result they were able to meet their interest and 
tax payments, pay off some of their debt, and 
make some needed purchases. But they had 
no assurance that they would receive a profit- 
able price the next year. The world wheat 
situation has not fundamentally changed. If 
our wheat farmers continue to produce 
200,000,000 bushels for export under condi- 
tions which now prevail, they must expect to 
take unprofitable prices. Temporary improve- 
ment in prices which increase the farm income 
is as welcome as rain in time of drouth, but the 
troubles which beset agriculture are too deep- 
seated to be healed by temporary and acci- 
dental relief, and if farmers should be deceived 
as to the true condition, such relief may do 
more harm than good. 

The fundamental trouble with agriculture is 
the distorted relationship between the prices 
of what farmers produce and the prices of 
other commodities, and the large increase that 
has taken place in his fixed expenses such as 
labor, interest, transportation, and taxes. Un- 
til prices of farm products rise to a fair ratio 

193 


OUR DEBT AND DUTY TO THE FARMER 


with prices of other things, or prices of other 
things drop to approximately the level of farm 
prices, agriculture will continue to suffer eco- 
nomic injustice. Farmers themselves cannot 
bring about this change except as a sufficient 
number of them abandon their farms and thus 
reduce production. This is a most dangerous 
and unwise policy from the national point of 
view, for such a process is always carried too 
far and results in great hardship on consumers 
before it can be checked. It is also a grossly 
unjust method because it requires that large 
numbers must die financially that others may 
live. Partial correction of the maladjustment 
of prices can be accomplished only by repealing 
legislation that confers special favors on other 
groups or by granting similar legislative favors 
to agriculture. Such favors given in recent 
years to labor, to industry, and to the railroads 
have helped to maintain high wages, high in- 
dustrial production costs, and high freight 
rates. They are an important cause of the 
present disparity between agricultural and in- 
dustrial commodity prices. 
194 


FAIR PRICE RELATIONSHIPS 


If the special favors now enjoyed by other 
economic groups are to stand, the propriety 
of granting compensating favors to agriculture 
cannot be questioned. By the Adamson Law, 
shortening the basic working day on railroads, 
the Government arbitrarily fixed wages at a 
rate 20 per cent. higher than then prevailed. 
In its operation of the railroads the Govern- 
ment raised wages of railroad workmen nearly 
100 per cent. and made changes in rules of work 
which further increased wages and added much 
to the amount of labor required. By the vari- 
ous immigration laws labor is protected from 
competition, which is the natural corrective of 
unduly high wages. In the railroad act of 1920 
the Government laid down a rule of rate- 
making designed to assure railroad capital a 
fair return. In the tariff act the Government 
undertakes to protect both industry and labor 
against foreign competition. Many other laws 
are designed to safeguard and promote the 
prosperity of both capital and labor. 

Now, the farmer is as truly a laboring-man 
as he who works on the railroad or in industry. 

195 


OUR DEBT AND DUTY TO THE FARMER 


He is also a capitalist in that he has large in- 
‘vestments in land and equipment. But such 
legislation as has been enacted presumably in 
aid of agriculture has been to increase produc- 
tion instead of to insure a fair reward for the 
farmer’s labor or a fair return on his capital. 
Moreover, government money and government 
agencies are used to increase his domestic com- 
petition, as in the promotion of reclamation. 
All of these laws which increase wages and 
rates and strengthen the bargaining-power of 
labor and capital help to bring about and main- 
tain an unfair relation between the prices of 
farm products and the prices of other things, 
and to decrease both the wages of the farmer 
and the return on his capital investment. To 
urge that the Government may with propriety 
fix wages and rate of return and restrict com- 
petition for some groups but may not apply the 
same principle to farmers is to deny common 
justice to one third of our population. 

The only subject fairly open for debate is 
whether it is better to reduce wages, railroad 
rates, and other industrial charges until they 

196 


FAIR PRICE RELATIONSHIPS 


bear a fair ratio to prices of agricultural prod- 
ucts, or whether the farmer should be raised to 
the level of other groups and industries. Con- 
sidering conditions at home and abroad, it 
seems clear that a sincere and determined effort 
to bring up the farmer rather than pull down 
other groups is the wiser and easier course, 
and better calculated to promote general hap- 
piness and prosperity. An indefinite period of 
disturbance, disorganization, and discontent, 
economic and political, would certainly follow a 
serious drive against wages and charges. Be- 
fore the lower price level could be established 
millions of men would be out of work, busi- 
ness and industry would be stagnant, and agri- 
culture would be pushed further into depres- 
sion. By raising agriculture to the price plane 
upon which labor and industry are now seated 
so comfortably, and then elevating the general 
price plane until it reaches a point about 70 per 
cent. above the pre-war level, justice would be 
done to the greatest number and the national 
interest would be best served. 

The weak spot in the agricultural situation is 

197 


OUR DEBT AND DUTY TO THE FARMER 


the over-production of certain commodities, 
more particularly wheat and pork products, of 
which we produce an exportable surplus and 
the prices of which are depressed by the world 
market. If prices of these products are raised 
to their pre-war purchasing-power, not all of 
the farmer’s troubles will be solved, but a step 
toward their solution will have been taken. 
Efforts to do this by abritrarily fixing min- 
imum prices in dollars and cents, by buying 
up surpluses, or by putting the Government 
into the business of handling farm crops will 
be perfectly futile unless they include a work- 
able plan for the disposition of surpluses. 

The first and only measure considered by 
Congress which seemed to offer reasonable 
hope of accomplishing the end desired first 
came up in the winter of 1923-24. It was re- 
ported favorably by the agricultural commit- 
tees of the House and the Senate and defeated 
when it came to a vote in the House. This was 
the much discussed MeNary-Haugen Bill, which 
provided for the setting up of government 
agencies charged with the duty, not of fixing 

198 


FAIR PRICE RELATIONSHIPS 


arbitrary prices, but of reéstablishing the pre- 
war ratio between the domestic prices of crops 
of which we produce an exportable surplus and 
the domestic prices of commodities in general. 
To accomplish this purpose government agen- 
cies were to be given authority to remove from 
the domestic market and sell in world markets 
the surplus of such crops, operating either 
through existing commercial agencies or di- 
rectly if the codperation of such commercial 
agencies could not be obtained. 

Under the McNary-Haugen plan the first 
step would be to determine the fair-ratio price 
of such crops, using as a standard the pre-war 
ratio. Whenever in the case of any one of 
these crops it was found that the prevailing 
prices were below this fair ratio steps would 
be taken to remove the surplus so as to allow 
the domestic price to rise to the proper point. 
The surplus would be sold on the markets of the 
world at world prices. Obviously such world 
prices would be below the fair-ratio price. 
There would consequently be some loss result- 
ing from the sale of the surplus. This loss 

199 


OUR DEBT AND DUTY TO THE FARMER 


would not be assumed by the Government but 
would be charged back to the producers of the 
crop, and the amount of the loss would be col- 
lected by the use of participation certificates as 
part payment of the original purchase price. 
Crops which were selling at prices as high as or 
higher than their pre-war ratio to other com- 
modities would not be handled by the govern- 
-ment agency, and when domestic prices of other 
crops should reach the normal pre-war ratio 
the work of the government agency would cease 
as to them. 

The sole purpose of the McNary-Haugen Bill 
was to reéstablish and maintain the normal 
pre-war ratio between the prices of agricultural 
crops of which we produce an exportable sur- 
plus and the general commodity-price index, 
thus putting agriculture somewhat near an 
equality with industry and labor. Had the 
plan functioned perfectly it would still not 
have assured the farmer a full measure of eco- 
nomic justice, because the index prices were 
to be taken at the primary markets, and would 

200 


FAIR PRICE RELATIONSHIPS 


thus include no allowance for the farmer’s les- 
sened price at the farm because of the increase 
in freight rates and handling charges on both 
what he sells and what he buys. However, it 
would have corrected much of the injustice un- 
der which the farmer suffers. What is more 
important, it would have established a national 
policy under which the farmer could safely go 
ahead and produce to the best of his ability 
with the assurance that he would get reason- 
ably fair prices for the products of his toil. 
This was not a price-fixing bill as that term 
is generally understood. It was not subject to 
the arguments that can be fairly brought 
against government price fixing. The bill 
recognized the fact that through legislation 
both industry and labor had been given certain 
advantages over agriculture, and undertook to 
correct this unfair situation by reéstablishing 
agriculture, partially at least, in its normal re- 
lationship to industry and labor. It did not 
undertake to influence prices of farm products 
consumed entirely at home, but dealt only with 
201 


OUR DEBT AND DUTY TO THE FARMER 


those products of which we produce an ex- 
portable surplus, and the prices of which were 
depressed because of this surplus. 

Nor did this bill contemplate permanent ap- 
propriations from the Federal Treasury. An 
initial appropriation of a considerable sum 
would have been necessary as a loan, but it was 
provided that all of the expense of operation 
~ and all losses resulting from the marketing of 
the surplus would be assumed by the producers. 
Thus the money originally advanced by the 
Treasury would have been repaid. It was 
simply a plan for the Government to help the 
producers of certain commodities to do what 
they could not do for themselves. 

This bill met with astonishingly violent op- 
position. It was fought by grain dealers and 
exporters who thought it might interfere with 
their business; by laissez-faire economists; by 
those who want nothing done to relieve discon- 
tent which makes grist for their political mill; 
by opponents of the protective tariff system 
who saw in this an application to farm needs of 
the tariff principle; by representatives of the 

202 


FAIR PRICE RELATIONSHIPS 


industrial interests who want nothing done to 
increase domestic prices of food products; and 
by many who did not study the measure for 
themselves but accepted at par the unintelligent 
criticisms made against it. 

Unfortunately debate on the bill was not cen- 
tered on its principles but on minor details. 
While the object in view could have been stated 
in few words, the committees were not content 
to present a bill setting forth this object and 
giving authority to a government agency to 
accomplish it in the most feasible way. In- 
stead they insisted on trying to prescribe in 
minute detail the exact manner in which the 
plan should be carried on. Each detail thus 
became the target for attack by skilful op- 
ponents, and it was not difficult to raise doubts 
in the minds of those who could not take time 
to study the measure for themselves. 

An analysis of the vote in the House on this 
measure is instructive; especially when com- 
pared with similar analysis of the vote on the 
tariff bill in 1922, as shown in the accompany- 
ing maps (figures 10 and 11). 

203 


OUR DEBT AND DUTY TO THE FARMER 


buno, ton[_] 
esuioby buon FE] 


T1168 (LYOdxX3) NSDNVH-AYVNSW SH 
NO S3AILVLNAS3Sdd3YH 40 3ASNOH NI 3LOA 





FAIR PRICE RELATIONSHIPS 





Il Saoor7, 


terete 
eaten 
sate! 


205 


25 
a 
Sr 
FRRK RID 
et 

oyeet 


ec6l 40 THE S4IYVL SHL 
NO S3AILVLN3S3Yd34 JO 3SNOH NI 3LOA 


OUR DEBT AND DUTY TO THE FARMER 


The agricultural States of the West always 
have supplied the votes needed to carry tariff 
measures, accepting the theory that it is to 
the advantage of agriculture to build up home 
industries with well-paid workmen who can 
afford to pay fair prices for the products of the 
farm. It will be noted, however, that the repre- 
- sentatives from the industrial regions failed to 

support the McNary-Haugen Bill, which farm- 

ers regarded as nothing more than a new ap- 
plication of the tariff principle to their needs. 

The farmers of the United States offer a bet- 
ter market for the products of our factories 
than can be found among the peoples of any 
other nation. If they are prosperous, their de- 
mand for the best products of our own indus- 
tries will steadily increase. The farmer is not 
unreasonable in asking that the doctrine which 
he has recognized and sustained as to industry 
be recognized by industry when applied to agri- 
culture. If it is not sound in one ease, then its 
fallibility may be suspected when applied in the 
other. If well-paid workmen make a good 
market for agricultural products, is it not 

206 


| 


FAIR PRICE RELATIONSHIPS 


equally true that well-paid farmers make a 
good home market for industrial products? 

The South voted consistently against both 
measures. Because of a series of short crops 
and a short world supply, cotton has been sell- 
ing far above the pre-war price. Had the price 
of cotton been as low relatively as the price of 
corn and hogs, very likely the representatives 
from the cotton States would have voted for 
the McNary-Haugen Bill. As the map shows, 
this measure was defeated by the unusual and 
what would seem to be an unnatural alliance of 
votes from the industrial regions which bene- 
fit from the tariff and the historic opponents of 
the tariff in the South. 

Passing over any discussion of the merits 
and demerits of this particular measure, the 
application of its principle seems the most 
sensible method of restoring the prices of the 
agricultural products of which we produce an 
exportable surplus in their normal relationship 
with the prices of other commodities. We can- 
not hope for material increase in home con- 
sumption except from the slow growth of our 

207 


OUR DEBT AND DUTY TO THE FARMER 


population. We cannot count on an increase 
in export demand, other than a temporary in- 
crease due to unfavorable world crop condi- 
tions. Under normal weather conditions it 
takes time to reduce production. Reductions 
in transportation charges, taxes, and the prices 
of other commodities sufficient to bring these 
~ costs and charges into line with the prices of 
agricultural products will not come quickly 
enough to help the farmer in his time of great- 
est need. Therefore, removal of the agricul- 
tural surplus seems the only feasible method of 
correcting the price maladjustment. It seems, 
moreover, to be free from the insurmountable 
objections which can be urged against govern- 
ment price fixing or government purchase. 
Perhaps some way of restoring fair prices 
for farm products other than that contemplated 
in the McNary-Haugen Bill can be found. The 
method is not of importance as long as it works. 
What is important is that the economic rights 
of the farmer be recognized, and that he be as- 
sured the same care and consideration from 
our legislative and administrative government 
208 


FAIR PRICE RELATIONSHIPS 


agencies as are granted to other groups. The 
farmer does not ask for more. 

The most effective direct action the Govern- 
ment can take to ease agricultural conditions 
quickly is to devise a practical plan to remove 
the exportable surplus of certain commodities 
and permit domestic prices of farm products 
to rise to thelr pre-war ratio with the general 
commodity-price index. Such a policy would 
not prove a complete cure but would give a 
large measure of relief, assure continued im- 
provement, and go far toward restoring the 
confidence of the farmer in the future of agri- 
culture and the good faith of his government. 
It is of equal importance, however, that a price 
level be established which will give the farmer 
a fair chance to pay his debts at somewhat near 
the level at which he contracted them, that is, 
about 70 per cent. above the pre-war level. 

The farmer benefits promptly with an ascend- 
ing price scale, since the prices of his products 
advance somewhat faster than prices of thing's 
he must buy. When the course is reversed, 
however, his losses are incomparably greater 

209 


OUR DEBT AND DUTY TO THE FARMER 


than were his previous gains. Of all groups 
farmers are the least able to protect themselves 
against a period of deflation. They cannot re- 
duce their expenses quickly enough, they can- 
not liquidate their business, and they cannot re- 
duce production. They are about as helpless 
as a toad under a harrow. 

During the war period the purchasing-power 
of all farm products advanced. The ratio of 
farm prices to wholesale prices of non- 
agricultural commodities rose from 15 per cent. 
below the pre-war level in 1916 to 5 per cent. 
above that level in 1919. In 1920, however, 
when the terribly mistaken policy of drastic 
deflation was adopted, the purchasing-power of 
farm products dropped again to 15 per cent. 
below pre-war levels; and in 1921, although the 
policy of deflation was reversed in that year, 
the purchasing-power of farm products fell to 
a point 34 per cent. below what it was before 
the war. 

The steady decrease in the federal discount 
rate, which began early in 1921, continued well 
into 1924. In the same period there was an ad- 

210 


FAIR PRICE RELATIONSHIPS 


vance in farm purchasing-power. The index . 
number of the purchasing-power of farm prod- 
ucts gradually rose from a low point of 66 
in the spring of 1921 to 74 in 1922, 78 in 1923, 
and 82 in September, 1924. In other words, as 
the discount rates went up, farm purchasing 
power went down, and vice versa. I do not 
want to be understood as believing that the 
price level is controlled by the discount rate 
alone. Nevertheless the price level can cer- 
tainly be profoundly influenced by our credit 
policies. It would seem that regulation of 
discount rates, with the help of other policies 
now recommended by eminent economists, 
should permit a very effective control of the 
general price level. 

Our gold reserves are now sufficient to per- 
mit a price level much higher than the present 
one if these reserves are used according to the 
monetary theories held sacred a few years ago. 
It is thus evident that the Federal Reserve 
Board, the most powerful institution of its kind 
in the world, can powerfully influence the do- 
mestic price level. In view of this fact, it is 

211 


OUR DEBT AND DUTY TO THE FARMER 


not to be expected that the farmer will be sat- 
isfied with any price level that does not give the 
dollar with which he must pay his debts a value 
about equal to the value of the dollar he bor- 
rowed, or which does not put him on an equal 
footing with other important groups. If this 
is not accomplished voluntarily through the ex- 
- ercise of the discretionary authority lodged in 
the board, it will not be surprising if the farmer 
goes to Congress for a mandate compelling it 
to be done. The farmer does not want an- 
other period of wild inflation. He has had 
enough of that and knows that it would do him 
more harm than good. But he understands 
now the injustice inflicted on him by deflation 
and a price level too low, and he has had 
enough of that also. 

Evidently the Federal Reserve Board during 
the last two years has been consciously exercis- 
ing its influence to control prices at a level well 
above the pre-war level. During the war and 
for two years afterward the board seemed to 
be dominated by the Treasury, and its policies 
were subordinated to what the Treasury 

212 


FAIR PRICE RELATIONSHIPS 


thought to be necessary in financing the coun- 
try. There is no point now in discussing the 
wisdom of that course, but it is evident that 
the interests of agriculture were given scant 
consideration. The policies of the board 
should be determined after full consideration of 
all interests, of which agriculture is one of the 
most important, and not subordinated to politi- 
cal exigencies. 

In amending the Federal Reserve Act by re- 
quiring that agriculture as well as commerce, 
industry, and finance should be considered in 
the appointment of members of the board, Con- 
gress took note of the effect on agriculture of 
policies adopted. It is not enough, however, 
that agriculture should have a special repre- 
sentative on the board. The importance of 
agriculture and the effect on agriculture of ac- 
tion taken by the board should be recognized 
by all of its members. The safeguarding of 
agriculture should be a primary consideration 
of statesmen, whether they are charged with 
legislative or administrative responsibility. 


213 


CHAPTER XII 


THE FUTURE OF THE AMERICAN FARMER 


: HE waste and distress resulting from the 

TT agricultural depression have forcibly 
shown the need of a sound long-time policy for 
the development of our agriculture. The wel- 
fare of millions of our people must not again 
be placed in jeopardy. 

We must develop a well-balanced agriculture 
which will give farmers a fair share in the na- 
tional income. Farming must be made to yield 
a return which will enable the rural population 
to maintain standards of living that are con- 
sistent with American ideals. The era of 
cheap, virgin land is now past. In the future, 
farmers must receive their financial rewards, 
not in higher land values, but in annual profits 
from their productive efforts. Though sur- 
plus production now depresses prices, the 

214 


FUTURE OF THE AMERICAN FARMER 


day is not so very far distant when our 
population will consume all we now produce 
and then press for more. We shall then have 
the problem of providing larger food sup- 
plies at prices that will be reasonable to the 
consumer and that will at the same time give 
the producer a fair return for his capital and 
labor. And in building for the future we must 
not fail to keep a watchful eye on the conserva- 
tion of our agricultural resources for the use 
of generations yet to come. 

Production of farm products in excess of 
effective demand has been a recurring cause of 
low returns in farming. At various times in 
our national development the distorted relation 
between the supply of farm products and the 
demand for them has resulted in depressing 
prices below profitable levels. While it is ex- 
tremely difficult to maintain a nice balance be- 
tween supply and demand in the case of agri- 
cultural products, yet it may be possible to re- 
duce, if not prevent, the serious maladjust- 
ments which prove so harmful. 

Stabilization of the farming industry cannot 

215 


OUR DEBT AND DUTY TO THE FARMER 


be attained without comprehensive knowledge 
of world conditions influencing the demand for 
the products of our soil. Economic trends and 
their significance for agriculture must be un- 
derstood in order that periods of depression 
may be anticipated and their effects softened. 
Our information on these matters must be 
broadened. The foreign service of the Depart- 
ment of Agriculture should be greatly strength- 
ened. Studies of price cycles and their bearing 
on agriculture should be pushed with vigor. 
Reports of intentions to plant should be issued 
regularly for the guidance of farmers. On the 
basis of comprehensive price and production 
data the volume of production should be con- 
trolled in so far as possible with the view of 
bringing farmers adequate prices. Of course, 
data of this kind will have value in shaping 
production only as applied in the farm business. 
Government agencies can provide information, 
but farmers, individually and collectively, must 
use this information in determining upon crop 
acreages and numbers of live stock. 

But the control which farmers may exercise 

216 


FUTURE OF THE AMERICAN FARMER 


over the volume of production has its limita- 
tions. While crop acreages and numbers of 
live stock may be increased or decreased at 
will, yields, on the other hand, are controlled 
largely by nature. The income of farmers may 
be influenced greatly by the weather over which 
farmers have no control, and likewise by insects 
and diseases which are subject to only limited 
control. Every effort, therefore, should be 
made to offset the adverse effects of these 
factors on the farm industry. A compre- 
hensive system of crop insurance should go 
far toward reducing losses resulting from short 
crops. On the other hand, some means should 
be found to prevent surpluses from unduly de- 
pressing prices of farm products in years of 
abundant yields. 

No small amount of the difficulties experi- 
enced by farmers in the past have been due to 
our haphazard policy of land utilization. As 
a new Nation we acquired a large body of virgin 
land which has been brought rapidly into use 
without carefully considering the market for 
farm products or the suitability of lands for 

217 


OUR DEBT AND DUTY TO THE FARMER 


farming purposes. The liberal policy of the 
Federal Government in disposing of the public 
lands to actual settlers has been regarded gen- 
erally as in the interests of the farming classes. 
What would appear more important than to 
create the largest possible opportunities for 
farmers to acquire land? This view seemed 
supported by the fact that much of the pres- 
sure for a liberal policy came from the pioneer 
communities. The fact is that the unduly 
rapid expansion of American agriculture 
promoted by the combination of exceedingly 
liberal land policies and immigration policies 
has been from time to time a source of severe 
hardship to farmers in the older established 
regions and also on the frontier of agriculture. 
Depression in the wake of expansion has been 
one of the most characteristic phases of the 
development of the farming industry. Our 
liberal land policy, to be sure, has stimulated 
national expansion and has benefited the manu- 
facturing and commercial classes, and particu- 
larly the real-estate interests, but it has in- 
218 


FUTURE OF THE AMERICAN FARMER 


jured also at various times large sections of 
our established farming industry. 

In recent years the troubles of large numbers 
of farmers may be ascribed in no small 
measure to the liberal disposal of the great 
body of semiarid land which comprises most 
of the western half of the United States. Be- 
cause of the prevailing aridity in this region, 
much of the land settled was unsuited for farm- 
ing purposes under the methods employed. 
Disastrous results have followed in innumer- 
able instances both for those who farmed the 
lands and for the stock-raising industry al- 
ready established in the region. Perhaps most 
of the harm resulting from this mistaken policy 
has now been done, since practically all of the 
tillable lands in the region have passed out of 
the hands of the Government. The Nation, 
however, still holds 185,000,000 acres of un- 
appropriated and unreserved lands which 
should be more wisely used. Not only should 
the area allotted to settlers be determined ac- 
cording to the agricultural possibilities of the 

219 j 


OUR DEBT AND DUTY TO THE FARMER 


land, but the homestead system should be ad- 
ministered with due regard to the integrity of 
the range industry. 

The unregulated use of the public domain as 
a grazing common has in itself been a cause of 
many of the economic difficulties suffered by 
the semiarid West. Our experience with this 
problem now points to the conclusion that it 
would be wise to extend to the lands of the 
public domain the efficient methods of regulated 
grazing now used on the forest reserves. 

Not content with diverting to private own- 
ership an excessive quantity of public land, the 
Government in its reclamation policy has en- 
gaged in actually subsidizing the use of land for 
agriculture. There is much to commend a fed- 
eral policy of land reclamation, but it cannot 
be too strongly emphasized that such develop- 
ment should not be promoted without consider- 
ing carefully the general agricultural situation 
and the conditions that influence the success of 
settlers. 

Our public land policy has also indirectly 
stimulated undue expansion of agriculture. 

220 


FUTURE OF THE AMERICAN FARMER 


Enormous areas of land are now held by pri- 
vate agencies which acquired ownership in one 
way or another for various purposes, espe- 
cially for timber, but far in advance of the 
agricultural needs of the country. The pres- 
sure of taxes and other carrying charges in- 
duces these agencies to engage in sharp compe- 
tition to effect settlement of their holdings. 
Settlers are persuaded to purchase land which 
they might never have sought to occupy unless 
influenced by skilful propaganda. The efforts 
of these agencies have been seconded by the 
activities of development associations, com- 
mercial clubs, railway land departments, and 
even the immigration departments in many 
States. Such interests are concerned with 
rapid local development even though it may be 
at the expense of other regions where superior 
opportunities exist. Moreover, the develop- 
ment activities of these bodies usually have no 
relation to the general or the local need for 
agricultural expansion. 

Such are the forces that contribute to the 
Over-expansion and misdirected development 

Q2} 


OUR DEBT AND DUTY TO THE FARMER 


of American agriculture, beating down the earn- 
ings of established farmers and making the 
process of expansion incredibly costly in wasted 
capital, futile effort, and personal sacrifice. 
Losses of this nature could be avoided by devel- 
oping a policy of deliberate and orderly ex- 
_ pansion based as far as possible on scientific 
knowledge. Such a policy must be developed 
by the Federal Government, for the interests 
of individuals and States are local rather than 
broadly national. 

A federal policy of land utilization and settle- 
ment would have as its starting point a clas- 
sification of the undeveloped and underdevel- 
oped lands of the Nation. This classification 
would supply the basis for determining what 
areas are best adapted for crops and what 
areas are most suitable for forests or range 
grazing. Adequate publicity of the results of 
such a survey would gc far to prevent the settle- 
ment of unsuitable lands. But it would be de- 
sirable to go a step further and place the stamp 
of federal approval on land settlement projects 
which are of outstanding desirability in the 

222 


FUTURE OF THE AMERICAN FARMER 


quality and location of the land, the price of 
real estate, and the facilities for settlement. 
Conservation of the Nation’s resources 
should be part and parcel of our agricultural 
policy. In the course of our rapid economic de- 
velopment we have destroyed our forests and 
robbed our soils. Whatever justification there 
may have been in the past for the exploitation 
of forests and soils, there can now be no ques- 
tion as to the need of restoring and conserv- 
ing them. A policy of reforestation should be 
generally adopted both for government and 
private forests. Marginal lands of relatively 
low value for farming purposes should be 
planted to forests, where conditions are favor- 
able. And, on the other hand, farming methods 
that restore and maintain the productiveness 
of our farms should be universally followed. 
The problem of maintaining our soils has been 
made more difficult, no doubt, because of the in- 
crease in tenant farming. It is highly essential, 
therefore, that landowners adopt leasing ar- 
rangements that protect the interests of both 
tenant and owner and at the same time build 
223 


OUR DEBT AND DUTY TO THE FARMER 


up the fertility of the soil. In order to pro- 
mote this ideal of conservation it might even 
be feasible for States to adopt taxation policies 
that reduce the tax burden on lands, the fer- 
tility of which is being conserved by legumes, 
pastures, or timber. 

No matter how perfectly land policies are 
worked out or how carefully we shape our pro- 
grams of production, it will always be neces- 
sary to consider special influences which may 
affect profoundly the fortunes of farmers. We 
have now reached a stage in our national exist- 
ence when it is essential for us to give more 
definite thought than heretofore to the prob- 
lem of where our Nation is being driven by 
rapidly growing industries and an increasing 
city population. From 1870 to 1900’ the en- 
ergies of our people were largely centered upon 
appropriating as rapidly as possible the soil 
and mineral wealth of the great Middle West. 
Billions of dollars were borrowed from Europe 
during the seventies and eighties to help in 
financing this rapid exploitation. 

The great surplus of food which we produced 

224 


FUTURE OF THE AMERICAN FARMER 


during this period furnished the convenient way 
to pay the interest on our Kuropean borrow- 
ings, while at the same time the cheapness of 
this abundant food laid the foundation for a 
phenomenal growth in city population in the 
Eastern United States and in Western Kurope. 
About 1900 the period of wasteful exploitation 
began to draw to a close, and a decade later 
the people in the cities began a continuous 
plaint against the high cost of living. At the 
same time farmers began to prosper, especially 
those who held land on the basis of values pre- 
vailing previous to 1900. Rising: prices for 
farm products resulted in the wealth of the 
average farmer increasing at a somewhat 
ereater rate than the wealth of the average city 
man from 1900 to 1914. When the World War 
broke out our Nation still depended largely on 
surplus cotton, wheat, and pork products to pay 
interest on the debt which we owed Hurope. 
Until 1914 a short crop in the United States 
was regarded as a serious matter because it 
might result in the necessity of settling our 
trade balance with Europe by exporting large 
225 


OUR DEBT AND DUTY TO THE FARMER 


amounts of gold and thus weakening the 
stability of our financial structure. 

Since the war the situation has been radically 
changed. For a long time to come there will 
be hundreds of millions of dollars in interest 
charges coming to this country every year in 
excess of what we owe in interest to the outside 
world. This situation can be disguised for a 
time by continued heavy foreign loans. It is 
undeniably true, however, that henceforth large 
exports of wheat and pork products will not 
make for prosperity here in the United States 
in the same way as previous to 1914. In fact 
such exports may in effect be thrown away, or 
worse than thrown away so far as the United 
States is concerned, unless we are willing to 
import large amounts of manufactured goods. 

During the next decade or two the United 
States must adjust herself to her position as 
the world’s greatest creditor nation. In this 
period of transition the economic force of world 
trade balances will be against continued large 
exports of wheat and meat products from the 
United States. In the normal course of events 

226 


FUTURE OF THE AMERICAN FARMER 


the increase in our population during the next 
two or three decades will be sufficient to con- 
sume the great surplus of wheat and meat which 
we have been exporting to Kurope. If at any 
time in the twentieth century extreme need 
arises and a strong patriotic or price stimulus 
is applied, the farmers of the United States can 
again produce a large surplus for export. The 
tendency of the immediate future, however, is 
strongly in the opposite direction. 

The agricultural situation during the tran- 
sition period will require the most skilful han- 
dling if our Nation is to continue to furnish a 
happy existence for the bulk of the people. 
Clearly the outstanding danger of the period 
is that the temporary surplus of relatively 
cheap food, combined with weak farm organi- 
zations disagreeing among themselves, will re- 
sult in the complete dominance of our economic 
and political life by the industrial and commer- 
cial point of view. Organized labor and the 
large business interests will both work during 
this period of temporarily cheap food for pol- 
icies which will result in a tremendous further 

227 


OUR DEBT AND DUTY TO THE FARMER 


increase in the Atlantic seaboard population. 
When eventually the period of abnormally 
cheap food begins to draw to a close city peo- 
ple will think that rising food prices are due 
to tariffs, unlawful combinations among far- 
mers, rising land values, and rapacious middle- 
men. Then when food prices rise far above 
normal they will try by law to bring back the 
cheap food of a bygone age. First they will 
probably endeavor to remove all tariffs on food 
in order that the large seaboard population may 
be fed to a considerable extent by food from 
Argentina, Canada, or Australia. They will 
then try to repeal legislation which seems to be 
for the special benefit of the farmer. Probably 
special land taxes will be devised. When these 
various measures fail to reduce food prices 
materially, there is certain to be an ever- 
growing city unrest, which may result in a 
greatly increased number of strikes and pos- 
sibly either war or revolution. 

We must build up an ideal of an agricultural 
civilization. Unfortunately the tendency to- 
day is to look on agriculture as the tail to the 

228 


FUTURE OF THE AMERICAN FARMER 


industrial kite. Too many of our most thought- 
ful people assume that urbanization and civ- 
ilization are the same thing. They even think 
that the farm population is a positive drag on 
the progress of the cities. They see nothing 
particularly worth while in generation after 
generation living, striving with nature, and dy- 
ing on the farm. Even the farmer himself 
often reaches the conclusion that while the farm 
may be all right in normal times as a place to 
save money and possibly raise a family, yet it 
is a poor place to enjoy the earnings they have 
accumulated. 

It is sad but true that we have failed as yet 
to build up a farm community civilization which 
offers as many satisfactions as present-day city 
civilization. Of course many of the satisfac- 
tions afforded by city civilization are of more 
or less fleeting value, but at that they are ca- 
pable of attracting our best farmers and their 
sons and daughters. 

The unattractiveness of the farm is largely 
because of the long hours of hard work, the 
lack of household conveniences, poor schools 

229 


OUR DEBT AND DUTY TO THE FARMER 


and churches, and unsatisfactory amusements. 
Farmers have not tried to make living on the 
farm really worth while. Surplus earnings 
have continually gone into higher land 
values rather than into higher standards 
of living. The problem of land values mount- 
ing unduly at the expense of a desirable 
standard of living can be partly solved by ed- 
ucating farmers in the knowledge of safe in- 
vestments other than farm land. The really 
important thing, however, is wide acceptance by 
farmers of the ideal of a rural civilization 
which carries as much satisfaction, depth of 
culture, and economic stability as city civiliza- 
tion. To create an ideal of sufficient compelling 
power, thousands of well-educated farm peo- 
ple must think with all their heart and soul — 
about how to give farming not only economic 
equality but also its full measure of human 
satisfaction in the long run. Continually di- 
recting the attention of farmers toward the ne- 
cessity of building a rural civilization which is 
fully as attractive as city civilization, will even- 
tually result in working out the details. Dan- 
230 


FUTURE OF THE AMERICAN FARMER 


ish farmers responded in a practical way to an 
ideal held before them in their hour of great- 
est darkness. Our farmers will do likewise 
when the men arise who are consumed by their 
vision of the things which should be but are 
not yet. | 

The men of vision must arise soon if the 
United States is to be saved from the fate of 
becoming a preponderantly industrial nation in 
which there is not a relation of equality between 
agriculture and industry. They must act in the 
faith that it will be good for the entire Nation if 
agriculture from henceforth advances on terms 
of absolute equality with industry. They must 
ever keep before the mind of the Nation the 
long-time point of view both materially and 
spiritually. They must set the minds of the 
farmers on fire with the desire for a rural civili- 
zation carrying sufficient economic satisfaction, 
beauty, and culture to offset completely the lure 
of the city. Farm leaders who possess this 
ideal will find it necessary to fight at times. 
In both the political and business worlds are 
thousands of men who hold sincerely to the 

231 


OUR DEBT AND DUTY TO THE FARMER 


short-time point of view. These men enjoy 
wealth and social position, and our farm leaders 
in their broader contacts will hesitate to oppose 
them. Unfortunately some of our farm leaders 
will find themselves in such financial straits 
that they will in effect sell out. Other farm 
leaders may be unnecessarily violent in expres- 
sing their point of view. The problem is to 
clarify continually the vision of a well-rounded, 
self-sustaining national life in which there shall 
be a fair balance between industry and agri- 
culture and in which our agriculture shall not 
be sacrificed for the building of cities. 


232 





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